Crypto Assets: The Evolution from Idealism to Political Maelstrom
Editorial: The Shift of Crypto Assets into the Ultimate Political Asset
An industry that once dreamed of transcending politics has now become synonymous with intertwined interests.
When the Qatari government proposed to replace Air Force One with a Boeing 747, President Trump’s response was quite direct: why refuse free benefits? In modern history, few presidential terms have quickly sparked so many conflicts of interest. However, the most concerning self-serving behavior in American politics is not happening on the runway, but on the blockchain—the home of trillions of dollars in Crypto Assets.
Over the past six months, Crypto Assets have played an unprecedented role in public life in the United States. Several cabinet officials have invested heavily in the digital assets sector, while encryption enthusiasts participate in managing regulatory agencies. Leading companies in the industry have become major donors to campaign activities, and exchanges and issuers have invested hundreds of millions of dollars to support friendly legislators and combat the opposition. The presidential family is promoting its Crypto Assets investments globally, and some of the largest investors in certain coins have the opportunity to dine with the president. The first family's Crypto Assets are valued at billions of dollars and may have become the largest single source of their wealth.
!7371385
This situation stands in stark contrast to the origins of Crypto Assets. When Bitcoin was born in 2009, it was welcomed by a utopian anti-authoritarian movement. Early participants harbored lofty goals, hoping to fundamentally change the financial system, protect individuals from asset plunder and inflation, and transfer power from large financial institutions to small investors. In their eyes, this was not just an asset, but a technological liberation movement.
This ideal now seems to have been forgotten. Crypto Assets not only fuel large-scale fraud, money laundering, and other financial crimes, but the industry has also established a special relationship with the U.S. government that transcends Wall Street or any other sector. Crypto Assets have become a typical asset entangled with political interests.
This stands in stark contrast to regions outside the United States. In recent years, various jurisdictions such as the European Union, Japan, Singapore, Switzerland, and the United Arab Emirates have successfully established new regulatory transparency for digital assets, but none have experienced such widespread conflicts of interest as in the United States. In developing countries, government seizure is common, inflation rates are high, and the risk of currency devaluation is severe; Crypto Assets continue to play the role that early idealists hoped for.
At the same time, the underlying technology of digital assets is gradually maturing. Although speculative elements still exist, mainstream financial companies and technology firms are beginning to take Crypto Assets seriously. In the past 18 months, the amount of physical assets, including private credit, US Treasury bonds, and commodities, that have been "tokenized" and traded on the blockchain has nearly doubled. Traditional financial institutions are also issuing tokenized money market funds, while Crypto Assets companies are issuing tokens linked to assets like gold.
!7371386
The payments space is probably the most promising use case. Some companies are embracing stablecoins (digital tokens backed by traditional assets). In the past month alone, several payment giants have announced that they will allow customers and merchants to use stablecoins for payments and settlements. Fintech companies have launched stablecoin financial accounts in more than 100 countries and acquired stablecoin platforms. Three years after abandoning the Diem project, the social media giant may also be returning to the space.
This is both a risk and an opportunity for cryptocurrency companies. Proponents argue that they had no choice but to go all out in the United States during the previous years of the current administration. Under the previous SEC, regulators were pessimistic about the industry, embroiling many high-profile companies in enforcement actions and lawsuits. Banks are scared off to provide services to cryptocurrency companies or to get involved in cryptocurrencies, especially stablecoins, on their own. From this point of view, there is a reason for the industry's complaints. Clarifying the legal status of cryptocurrencies through the courts, rather than Congress, is neither efficient nor always fair. There has now been a significant shift in regulatory attitude, with most cases against crypto companies dropped.
The Crypto Assets Industry in the United States Needs to Be Repositioned
New rules still need to be established to ensure that risks do not seep into the financial system. If politicians fail to properly regulate Crypto Assets due to fear of the industry's electoral influence, the long-term consequences will be very harmful. The risks of inadequate security measures are not merely theoretical concerns. The three largest banks that collapsed in 2023 had significant exposure to the fluctuating deposits of the Crypto Assets industry. Stablecoins are susceptible to runs and should be regulated like banks.
If these changes are not made, the leaders of Crypto Assets may ultimately regret the political agreements reached in Washington. The industry has largely remained silent on the conflicts of interest arising from the encryption investments of politicians' families. Legislation is needed to clarify the status of the industry and assets, providing Crypto companies with a more reasonable regulatory environment they have long sought. However, the intertwining of business interests and government affairs has made this more difficult. In May of this year, a Crypto Assets bill failed to pass in a procedural vote in the Senate as several senators withdrew their support.
Any industry that is so closely associated with a particular political party will face the impact of voter sentiment fluctuations. The industry's practice of taking sides indicates that it is deeply mired in political turmoil. Crypto Assets play a new role in policy-making, but today, the reputation and fate of the industry are closely tied to the rise and fall of its political allies. Crypto Assets have indeed brought benefits to certain political families, but ultimately, the returns from this relationship may only be one-sided.
Crypto Assets industry becomes the core of American politics
The rise of Crypto Assets in American politics is mainly attributed to investments from political families, friendly regulators, and significant election spending.
!7371387
In late April this year, a Texas logistics company with a market value of only $3 million announced that it would borrow up to $20 million to purchase a special crypto asset - the Meme coin launched three days before the president began his second term. The company's CEO stated that purchasing this token would be an "effective way" to "advocate" for the trade policies the company desires. The same week the announcement was made, the management company of this Meme coin had just announced that its largest investor would be invited to dinner with the president.
Meanwhile, in Lahore, Pakistan, the cryptocurrency committee established by the finance minister in March is celebrating a partnership with a company that is part of an American political family. The company pledged to help Pakistan develop blockchain products, convert physical assets into digital tokens, and provide broader advice on the cryptocurrency industry. Details of the agreement, including financial terms, were not disclosed. The Indian media interpreted this as an attempt by Pakistan to win the favor of the US leadership, a reading that became more nuanced two weeks later when the US top brass attributed a ceasefire in the India-Pakistani military conflict to themselves.
These events mark a significant shift in the political landscape of Washington. Crypto Assets are on the rise, with political figures and their family members promoting them both domestically and internationally, while regulators appointed by the political sphere are adopting a more lenient stance. Investors are flocking in, and large pressure groups are springing up to support political candidates who endorse Crypto Assets and to attack opponents. Investors and supporters have found that this can provide a pathway to access key figures. This young industry has suddenly found itself at the core of American public life, but its close ties to specific political forces have also turned it into a partisan endeavor to some extent.
For many years, numerous industries have been entangled with the political elite. Banks, military-industrial companies, and large pharmaceutical corporations have long maintained influence in the corridors of power. In the late 19th century, railroad companies exerted significant influence on national and local politics, obtaining favorable regulations that led to great prosperity and catastrophic downturns.
But no other industry has risen from fringe to official darling with such an astonishing speed as cryptocurrency. A few years ago, the total value of all cryptocurrencies in the world was less than $20 billion, and today it is more than $3 trillion. At the hearings of financial regulators at the time, cryptocurrencies were not mentioned at all. Until 2021, certain politicians were disdainful of digital assets, saying that Bitcoin "looks like a scam" and "doesn't like it because it's another currency that competes with the dollar." That view seemed to be confirmed the following year, when digital asset prices plummeted and $8 billion in fraud occurred on major crypto exchanges, heralding a downturn in the industry known as the "crypto winter."
!7371388
Regulators are also pessimistic about many crypto assets. Previously, the heads of regulatory agencies insisted that many cryptocurrencies are actually securities and should only be traded on regulated exchanges. Regulators subsequently filed lawsuits against several large crypto trading platforms as well as many other digital asset companies.
However, as the political winds shifted, those financial regulators who once tried to stifle Crypto Assets suddenly became enthusiastic about supporting it. This is because a staunch industry supporter was appointed to lead these agencies. The new SEC chairman previously served as the co-chairman of a Crypto Assets industry organization for eight years, and the nominee for the Commodity Futures Trading Commission was previously the head of crypto policy at a well-known venture capital firm.
The change in the leadership of the SEC in the United States has led to a major policy shift. It now takes a narrower view of which crypto assets are securities and need to be regulated. The commissioner in charge of the newly formed Crypto Task Force is affectionately known in the industry as "Crypto Mom." Since the change of leadership, more than a dozen enforcement actions against crypto companies have been halted, including against two major exchanges, a major cryptocurrency issuer, and the first crypto company to receive a state banking license. These changes naturally boosted industry confidence: VC funds poured nearly $5 billion into crypto companies in the first quarter of 2025, the highest in nearly three years.
It is not uncommon for significant regulatory reversals to occur when a new government takes office and installs like-minded officials. When a conservative government replaces a progressive one, the regulatory stance often shifts from intervention to laissez-faire. However, it is unusual for political figures and their families to be deeply involved in industries that benefit from regulatory relaxation.
In just a few months, certain political families have seen a rapid increase in their investments in the cryptocurrency space. Founded in September 2024, the family-owned 60%-owned company launched a stablecoin called USD1 in March 2025, which has a market capitalization of more than $2 billion, making it one of the world's largest dollar-pegged cryptocurrencies.
The family also owns other Crypto Assets, including a Meme coin that reached a market value of about $15 billion shortly after its launch, with the related company holding 80% of these tokens. Another family member launched a Meme coin in January of this year that also experienced a surge in value before crashing.
The volatility and ownership uncertainty of these assets make it difficult to accurately assess the scale of the wealth involved. However, Crypto Assets may now constitute the largest single business line for the relevant family, with one Meme coin alone valued at nearly $2 billion, comparable to the total value of all their properties, golf courses, and clubs.
Large electoral pressure groups are also investing heavily to promote industry interests. A network of super PACs made up of Protect Progress, Fairshake and Defend American Jobs spent more than $130 million before last year's election, making it one of the highest-spending groups in the campaign. With $260 million in revenue from the last election cycle, Fairshake is not only the largest PAC advocating for a specific industry, but also the largest nonpartisan super PAC of all types. By comparison, the National Association of Realtors raised only about $20 million.
Rather than emphasizing candidates' views on cryptocurrency, these organizations advertise on any issue that could promote their preference for politicians or discourage them from disliking them. For example, by criticizing a congressman's ad for trying to sell a list of campaign donors, he helped her lose the Senate primary; Or support him through advertisements praising another parliamentarian's stance in the fight against crime. "Many industries have tried this. The difference is in its singular focus, and that's where the real game changer," the spokesperson explained. "The core strategy has always been: support the supporters and oppose the naysayers."
An executive from a regulatory reform advocacy group commented: "This is the most blatant display of money and power I've ever seen in a legislative body." One organization alone has $116 million in cash ready to deploy for the 2026 midterm elections.
The industry's "war chest" is expected to help persuade Congress to adopt favorable policies. Most importantly, it hopes Congress will clarify the legal status of crypto assets to prevent regulatory attitudes from swinging again in future elections. After all, political figures and their appointed officials come and go, while legislation tends to be more lasting.
The crypto industry hopes to define most crypto assets as commodities, regulated by the Commodity Futures Trading Commission ( CFTC ), rather than as securities regulated by the SEC. The CFTC is responsible for the regulation of most financial derivatives trading and is the smaller of the two regulatory agencies — with a budget of only $399 million this fiscal year and 725 full-time employees, compared to the SEC's budget of $2.6 billion and 5,073 employees. The industry views the CFTC as a more lenient regulatory option.
A bill designating the CFTC as the primary regulator for cryptocurrencies was blocked in Congress last year. But political forces that prefer light regulation have controlled both chambers since the beginning of the year. What's more, many of the opposition also agree on the need to place cryptoassets on a clearer legal basis. However, the current entanglement of interests is making it harder for the industry to gain sufficient support in Congress.
Obvious conflicts of interest have sparked a wave of criticism. Critics argue that many investors do business with or purchase related Crypto Assets from specific families merely to please the centers of power, essentially accusing them of engaging in power peddling. For example, after announcing a gala for major investors, the price of the related Meme coin soared. Another controversy involves a government investment firm deciding to use a newly established company's stablecoin as a tool to invest $2 billion in a trading platform. It is already unusual to fund such a large-scale investment with Crypto Assets, and the business logic of choosing a brand new and untested cryptocurrency is even more unclear. However, the company benefited enormously from this: the deal catapulted its stablecoin from obscurity to becoming the seventh largest stablecoin in the world.
In May of this year, a bipartisan bill aimed at creating a clear regulatory framework for stablecoins failed to gain Senate approval. Advocates of the bill were once confident about its passage, but previously supportive legislators have begun to worry that it could fuel what they see as influence peddling. Some lawmakers have proposed a bill aimed at preventing the president, members of Congress, and senior officials from issuing, sponsoring, or endorsing Crypto Assets. Even the co-sponsors, who have consistently advocated for clear encryption regulation, acknowledged that certain promotional activities "raise hesitations."
Concerns about cryptocurrency regulation are not limited to political ties. Experts from the Financial Stability Program at Yale University believe that a fast-growing crypto industry, regulated by small, non-interventionist regulators, could pose a risk to financial stability. He pointed out that cryptocurrencies are the central factor that will shake the US banking crisis in 2023. The first banks to fail – SilverGate, Silicon Valley, and Signature – were hit hard by the "crypto winter" because of their large dealings with crypto firms and investors. When fears of its losses turned into a run, the panic quickly spread to the broader financial system. Skeptical analysts believe that normalizing the use of volatile crypto assets will inevitably inject greater risks into the financial system.
Publicly, crypto advocates remain optimistic that the industry will receive supportive legislation. Privately, however, some industry leaders are harshly critical of the current direction. They fear that the industry's image as a tool for trading political influence will make it difficult for lawmakers to support favorable regulations. Notable investors in the industry are among the few who are willing to publicly say that the current situation is making it harder for crypto-friendly legislation to be approved. He said that when he spoke about these issues, he was contacted and expressed his dissatisfaction. "The conflict is real, and no one can really dispute it."
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Crypto Assets from Utopian Ideals to Political Assets: The Industry Faces a Turning Point of Regulatory Change and Political Entanglements
Crypto Assets: The Evolution from Idealism to Political Maelstrom
Editorial: The Shift of Crypto Assets into the Ultimate Political Asset
An industry that once dreamed of transcending politics has now become synonymous with intertwined interests.
When the Qatari government proposed to replace Air Force One with a Boeing 747, President Trump’s response was quite direct: why refuse free benefits? In modern history, few presidential terms have quickly sparked so many conflicts of interest. However, the most concerning self-serving behavior in American politics is not happening on the runway, but on the blockchain—the home of trillions of dollars in Crypto Assets.
Over the past six months, Crypto Assets have played an unprecedented role in public life in the United States. Several cabinet officials have invested heavily in the digital assets sector, while encryption enthusiasts participate in managing regulatory agencies. Leading companies in the industry have become major donors to campaign activities, and exchanges and issuers have invested hundreds of millions of dollars to support friendly legislators and combat the opposition. The presidential family is promoting its Crypto Assets investments globally, and some of the largest investors in certain coins have the opportunity to dine with the president. The first family's Crypto Assets are valued at billions of dollars and may have become the largest single source of their wealth.
!7371385
This situation stands in stark contrast to the origins of Crypto Assets. When Bitcoin was born in 2009, it was welcomed by a utopian anti-authoritarian movement. Early participants harbored lofty goals, hoping to fundamentally change the financial system, protect individuals from asset plunder and inflation, and transfer power from large financial institutions to small investors. In their eyes, this was not just an asset, but a technological liberation movement.
This ideal now seems to have been forgotten. Crypto Assets not only fuel large-scale fraud, money laundering, and other financial crimes, but the industry has also established a special relationship with the U.S. government that transcends Wall Street or any other sector. Crypto Assets have become a typical asset entangled with political interests.
This stands in stark contrast to regions outside the United States. In recent years, various jurisdictions such as the European Union, Japan, Singapore, Switzerland, and the United Arab Emirates have successfully established new regulatory transparency for digital assets, but none have experienced such widespread conflicts of interest as in the United States. In developing countries, government seizure is common, inflation rates are high, and the risk of currency devaluation is severe; Crypto Assets continue to play the role that early idealists hoped for.
At the same time, the underlying technology of digital assets is gradually maturing. Although speculative elements still exist, mainstream financial companies and technology firms are beginning to take Crypto Assets seriously. In the past 18 months, the amount of physical assets, including private credit, US Treasury bonds, and commodities, that have been "tokenized" and traded on the blockchain has nearly doubled. Traditional financial institutions are also issuing tokenized money market funds, while Crypto Assets companies are issuing tokens linked to assets like gold.
!7371386
The payments space is probably the most promising use case. Some companies are embracing stablecoins (digital tokens backed by traditional assets). In the past month alone, several payment giants have announced that they will allow customers and merchants to use stablecoins for payments and settlements. Fintech companies have launched stablecoin financial accounts in more than 100 countries and acquired stablecoin platforms. Three years after abandoning the Diem project, the social media giant may also be returning to the space.
This is both a risk and an opportunity for cryptocurrency companies. Proponents argue that they had no choice but to go all out in the United States during the previous years of the current administration. Under the previous SEC, regulators were pessimistic about the industry, embroiling many high-profile companies in enforcement actions and lawsuits. Banks are scared off to provide services to cryptocurrency companies or to get involved in cryptocurrencies, especially stablecoins, on their own. From this point of view, there is a reason for the industry's complaints. Clarifying the legal status of cryptocurrencies through the courts, rather than Congress, is neither efficient nor always fair. There has now been a significant shift in regulatory attitude, with most cases against crypto companies dropped.
The Crypto Assets Industry in the United States Needs to Be Repositioned
New rules still need to be established to ensure that risks do not seep into the financial system. If politicians fail to properly regulate Crypto Assets due to fear of the industry's electoral influence, the long-term consequences will be very harmful. The risks of inadequate security measures are not merely theoretical concerns. The three largest banks that collapsed in 2023 had significant exposure to the fluctuating deposits of the Crypto Assets industry. Stablecoins are susceptible to runs and should be regulated like banks.
If these changes are not made, the leaders of Crypto Assets may ultimately regret the political agreements reached in Washington. The industry has largely remained silent on the conflicts of interest arising from the encryption investments of politicians' families. Legislation is needed to clarify the status of the industry and assets, providing Crypto companies with a more reasonable regulatory environment they have long sought. However, the intertwining of business interests and government affairs has made this more difficult. In May of this year, a Crypto Assets bill failed to pass in a procedural vote in the Senate as several senators withdrew their support.
Any industry that is so closely associated with a particular political party will face the impact of voter sentiment fluctuations. The industry's practice of taking sides indicates that it is deeply mired in political turmoil. Crypto Assets play a new role in policy-making, but today, the reputation and fate of the industry are closely tied to the rise and fall of its political allies. Crypto Assets have indeed brought benefits to certain political families, but ultimately, the returns from this relationship may only be one-sided.
Crypto Assets industry becomes the core of American politics
The rise of Crypto Assets in American politics is mainly attributed to investments from political families, friendly regulators, and significant election spending.
!7371387
In late April this year, a Texas logistics company with a market value of only $3 million announced that it would borrow up to $20 million to purchase a special crypto asset - the Meme coin launched three days before the president began his second term. The company's CEO stated that purchasing this token would be an "effective way" to "advocate" for the trade policies the company desires. The same week the announcement was made, the management company of this Meme coin had just announced that its largest investor would be invited to dinner with the president.
Meanwhile, in Lahore, Pakistan, the cryptocurrency committee established by the finance minister in March is celebrating a partnership with a company that is part of an American political family. The company pledged to help Pakistan develop blockchain products, convert physical assets into digital tokens, and provide broader advice on the cryptocurrency industry. Details of the agreement, including financial terms, were not disclosed. The Indian media interpreted this as an attempt by Pakistan to win the favor of the US leadership, a reading that became more nuanced two weeks later when the US top brass attributed a ceasefire in the India-Pakistani military conflict to themselves.
These events mark a significant shift in the political landscape of Washington. Crypto Assets are on the rise, with political figures and their family members promoting them both domestically and internationally, while regulators appointed by the political sphere are adopting a more lenient stance. Investors are flocking in, and large pressure groups are springing up to support political candidates who endorse Crypto Assets and to attack opponents. Investors and supporters have found that this can provide a pathway to access key figures. This young industry has suddenly found itself at the core of American public life, but its close ties to specific political forces have also turned it into a partisan endeavor to some extent.
For many years, numerous industries have been entangled with the political elite. Banks, military-industrial companies, and large pharmaceutical corporations have long maintained influence in the corridors of power. In the late 19th century, railroad companies exerted significant influence on national and local politics, obtaining favorable regulations that led to great prosperity and catastrophic downturns.
But no other industry has risen from fringe to official darling with such an astonishing speed as cryptocurrency. A few years ago, the total value of all cryptocurrencies in the world was less than $20 billion, and today it is more than $3 trillion. At the hearings of financial regulators at the time, cryptocurrencies were not mentioned at all. Until 2021, certain politicians were disdainful of digital assets, saying that Bitcoin "looks like a scam" and "doesn't like it because it's another currency that competes with the dollar." That view seemed to be confirmed the following year, when digital asset prices plummeted and $8 billion in fraud occurred on major crypto exchanges, heralding a downturn in the industry known as the "crypto winter."
!7371388
Regulators are also pessimistic about many crypto assets. Previously, the heads of regulatory agencies insisted that many cryptocurrencies are actually securities and should only be traded on regulated exchanges. Regulators subsequently filed lawsuits against several large crypto trading platforms as well as many other digital asset companies.
However, as the political winds shifted, those financial regulators who once tried to stifle Crypto Assets suddenly became enthusiastic about supporting it. This is because a staunch industry supporter was appointed to lead these agencies. The new SEC chairman previously served as the co-chairman of a Crypto Assets industry organization for eight years, and the nominee for the Commodity Futures Trading Commission was previously the head of crypto policy at a well-known venture capital firm.
The change in the leadership of the SEC in the United States has led to a major policy shift. It now takes a narrower view of which crypto assets are securities and need to be regulated. The commissioner in charge of the newly formed Crypto Task Force is affectionately known in the industry as "Crypto Mom." Since the change of leadership, more than a dozen enforcement actions against crypto companies have been halted, including against two major exchanges, a major cryptocurrency issuer, and the first crypto company to receive a state banking license. These changes naturally boosted industry confidence: VC funds poured nearly $5 billion into crypto companies in the first quarter of 2025, the highest in nearly three years.
It is not uncommon for significant regulatory reversals to occur when a new government takes office and installs like-minded officials. When a conservative government replaces a progressive one, the regulatory stance often shifts from intervention to laissez-faire. However, it is unusual for political figures and their families to be deeply involved in industries that benefit from regulatory relaxation.
In just a few months, certain political families have seen a rapid increase in their investments in the cryptocurrency space. Founded in September 2024, the family-owned 60%-owned company launched a stablecoin called USD1 in March 2025, which has a market capitalization of more than $2 billion, making it one of the world's largest dollar-pegged cryptocurrencies.
The family also owns other Crypto Assets, including a Meme coin that reached a market value of about $15 billion shortly after its launch, with the related company holding 80% of these tokens. Another family member launched a Meme coin in January of this year that also experienced a surge in value before crashing.
The volatility and ownership uncertainty of these assets make it difficult to accurately assess the scale of the wealth involved. However, Crypto Assets may now constitute the largest single business line for the relevant family, with one Meme coin alone valued at nearly $2 billion, comparable to the total value of all their properties, golf courses, and clubs.
Large electoral pressure groups are also investing heavily to promote industry interests. A network of super PACs made up of Protect Progress, Fairshake and Defend American Jobs spent more than $130 million before last year's election, making it one of the highest-spending groups in the campaign. With $260 million in revenue from the last election cycle, Fairshake is not only the largest PAC advocating for a specific industry, but also the largest nonpartisan super PAC of all types. By comparison, the National Association of Realtors raised only about $20 million.
Rather than emphasizing candidates' views on cryptocurrency, these organizations advertise on any issue that could promote their preference for politicians or discourage them from disliking them. For example, by criticizing a congressman's ad for trying to sell a list of campaign donors, he helped her lose the Senate primary; Or support him through advertisements praising another parliamentarian's stance in the fight against crime. "Many industries have tried this. The difference is in its singular focus, and that's where the real game changer," the spokesperson explained. "The core strategy has always been: support the supporters and oppose the naysayers."
An executive from a regulatory reform advocacy group commented: "This is the most blatant display of money and power I've ever seen in a legislative body." One organization alone has $116 million in cash ready to deploy for the 2026 midterm elections.
The industry's "war chest" is expected to help persuade Congress to adopt favorable policies. Most importantly, it hopes Congress will clarify the legal status of crypto assets to prevent regulatory attitudes from swinging again in future elections. After all, political figures and their appointed officials come and go, while legislation tends to be more lasting.
The crypto industry hopes to define most crypto assets as commodities, regulated by the Commodity Futures Trading Commission ( CFTC ), rather than as securities regulated by the SEC. The CFTC is responsible for the regulation of most financial derivatives trading and is the smaller of the two regulatory agencies — with a budget of only $399 million this fiscal year and 725 full-time employees, compared to the SEC's budget of $2.6 billion and 5,073 employees. The industry views the CFTC as a more lenient regulatory option.
A bill designating the CFTC as the primary regulator for cryptocurrencies was blocked in Congress last year. But political forces that prefer light regulation have controlled both chambers since the beginning of the year. What's more, many of the opposition also agree on the need to place cryptoassets on a clearer legal basis. However, the current entanglement of interests is making it harder for the industry to gain sufficient support in Congress.
Obvious conflicts of interest have sparked a wave of criticism. Critics argue that many investors do business with or purchase related Crypto Assets from specific families merely to please the centers of power, essentially accusing them of engaging in power peddling. For example, after announcing a gala for major investors, the price of the related Meme coin soared. Another controversy involves a government investment firm deciding to use a newly established company's stablecoin as a tool to invest $2 billion in a trading platform. It is already unusual to fund such a large-scale investment with Crypto Assets, and the business logic of choosing a brand new and untested cryptocurrency is even more unclear. However, the company benefited enormously from this: the deal catapulted its stablecoin from obscurity to becoming the seventh largest stablecoin in the world.
In May of this year, a bipartisan bill aimed at creating a clear regulatory framework for stablecoins failed to gain Senate approval. Advocates of the bill were once confident about its passage, but previously supportive legislators have begun to worry that it could fuel what they see as influence peddling. Some lawmakers have proposed a bill aimed at preventing the president, members of Congress, and senior officials from issuing, sponsoring, or endorsing Crypto Assets. Even the co-sponsors, who have consistently advocated for clear encryption regulation, acknowledged that certain promotional activities "raise hesitations."
Concerns about cryptocurrency regulation are not limited to political ties. Experts from the Financial Stability Program at Yale University believe that a fast-growing crypto industry, regulated by small, non-interventionist regulators, could pose a risk to financial stability. He pointed out that cryptocurrencies are the central factor that will shake the US banking crisis in 2023. The first banks to fail – SilverGate, Silicon Valley, and Signature – were hit hard by the "crypto winter" because of their large dealings with crypto firms and investors. When fears of its losses turned into a run, the panic quickly spread to the broader financial system. Skeptical analysts believe that normalizing the use of volatile crypto assets will inevitably inject greater risks into the financial system.
Publicly, crypto advocates remain optimistic that the industry will receive supportive legislation. Privately, however, some industry leaders are harshly critical of the current direction. They fear that the industry's image as a tool for trading political influence will make it difficult for lawmakers to support favorable regulations. Notable investors in the industry are among the few who are willing to publicly say that the current situation is making it harder for crypto-friendly legislation to be approved. He said that when he spoke about these issues, he was contacted and expressed his dissatisfaction. "The conflict is real, and no one can really dispute it."