As my colleague David Dayen has been covering here at the Prospect, the cryptocurrency “industry” is in the midst of a major lobbying push to get pro-crypto legislation through Congress. The sticking point is the Senate, where to get around the filibuster’s 60-vote requirement, at least seven Democratic votes would be needed, assuming every Republican supports it.
That support seemed to be forthcoming, until Donald Trump started using crypto for some of his habitual mind-boggling corruption. Just before taking office, he launched a meme coin and then immediately rug-pulled buyers to the tune of $350 million; he then promised that the biggest $TRUMP bag-holders would get a dinner at the White House. Then Trump launched his own stablecoin, USD1 (that is, a crypto token whose value is supposedly pegged to the dollar), and in May, an Abu Dhabi investment fund announced that it would use that coin to facilitate a $2 billion purchase of the crypto exchange Binance. That was too much for these Democratic senators to stomach.
But not for long. Semafor reports that pro-crypto Democrats—that is, the ones who collected millions in crypto campaign contributions—have gotten a few token concessions, but nothing whatsoever that would stop Trump’s corruption spree, and this is likely enough to get it through. Sources familiar with negotiations have confirmed to the Prospect that a vote is planned for next week and, as things stand, it will probably pass.
It’s important to remember that crypto has not ever demonstrated any legitimate business use case at scale. Overwhelmingly, it is used for pure financial speculation and crime—both scams internal to the system like rug pulls, pump-and-dumps, and wash trading; also good old-fashioned robbery and/or money laundering by drug cartels, human traffickers, or North Korea. For any real business, crypto is worse than normal money in every way: less stable, less secure, and orders of magnitude more risky and expensive to use. Even several crypto-affiliated businesses that theoretically should have worked, like trading platforms making fees off crypto gamblers selling magic beans to each other, have turned out to be riddled with fraud and collapsed.
It follows that this crypto bill is just about the worst of all worlds. As Democratic staffers at the Senate Banking Committee point out, the regulatory protections are all but meaningless. The bill says that Consumer Financial Protection Bureau protections exist, but doesn’t explicitly grant it authority over the industry, or note that Trump has torn the guts out of the agency and is attempting to shut it down entirely. It says that stablecoins can’t have misleading names that suggest they are backed by the government, but carves out “USD,” which is what Trump’s and most of the big ones are called.
Worse, it effectively blows a giant hole in U.S. criminal law. Not only would stablecoins issued by foreign companies outside of American regulations be allowed to circulate on U.S. exchanges under this bill, but they could do so “even if issued by offshore companies that refuse to comply with U.S. court orders to stop terrorist financing and money laundering.”
In addition to allowing Trump to collect as many payments from foreign governments as they care to provide—a flagrant violation of the Constitution, by the way—and opening up a big juicy opportunity for drug dealers and terrorists the world over, this bill would further enable crypto to intertwine itself with the financial system. Wall Street firms are already getting into crypto “products,” and as the Senate staffers point out, an independent analysis suggests that this bill would cause the stablecoin market to inflate by up to ten times, to $2 trillion. When crypto suffers another galloping financial crisis, as it did in 2022, I’d bet that this time enough Wall Street banks and Silicon Valley firms will be at risk that they’ll get a 2008-style bailout with taxpayer money—the last and biggest scam of them all.
May 16, 2025
3:00 PM
