Published in our Winter 2026 issue
Without Donald Trump, the crypto industry would have met a very different fate. In the years before his second presidential campaign kicked off, crypto markets were undergoing a series of downturns that, if not necessarily spelling cryptocurrency’s death knell, were threatening to dramatically weaken the standing of an asset class that had minted a new generation of economic elites, relegating it to the status of a niche object for the likes of tech hobbyists, online gamblers, and drug dealers. 2022 in particular was such a bad time for crypto that commentators started to refer to it as a “crypto winter.” The value of Bitcoin—the cryptocurrency that, back in 2009, gave birth to the crypto revolution in the first place—had skyrocketed in the few preceding years, but in November 2022 it fell precipitously, taking down many crypto initiates with it. Sam Bankman-Fried’s FTX, at its peak the third-largest crypto exchange in the world, collapsed, and Bankman-Fried and his friends were arrested. Apart from the most enthusiastic keepers of the faith, few were predicting a turnaround anytime soon.
But by the fall of 2025, crypto was booming again. Bitcoin’s value grew sixfold, from its 2023 trough of $20,000 up to $120,000, with the total value of crypto assets more than tripling in the same period. In the year leading up to June 2025, the number of crypto billionaires grew by almost a third, reaching thirty-six people. And Trump, who had spent much of the campaign trail promising to keep the good times rolling, rode those rising tides all the way to the White House.
At one point, the president might have seemed an unlikely savior. During his first term and after leaving office, he was a vocal skeptic, denouncing crypto as a “scam” and warning that it could undermine the U.S. dollar. But by 2024, Trump announced that he was the crypto candidate—and, if elected, would make the United States the “crypto capital of the planet.” His conversion was the culmination of a long-term crypto lobbying campaign—with its promise of significant political donations—and, even more importantly, his awakening to the possibilities of personal enrichment for an otherwise cash-strapped Trump family enterprise.
The speed, scope, and scale of crypto’s rise from the ashes reflects the success of a political project much more than a purely economic one.
For the crypto industry, Trump was only one target of their intense, highly focused intervention into the 2024 elections. By some estimates, crypto firms spent over $245 million, more than any other industry. Leading the charge were three major pro-crypto PACs—Fairshake, Protect Progress, and Defend American Jobs—which raised and channeled funds from firms like Coinbase, Ripple, and Jump Crypto and investors like Andreessen Horowitz and the Winklevoss twins (Tyler and Cameron) to elect as broad a bipartisan slate of pro-crypto candidates as possible.
It was an astonishingly successful effort. The PACs spent $40 million to defeat Democrat Sherrod Brown in Ohio and elect his Republican challenger, but they also supported pro-crypto Democrats Elissa Slotkin in Michigan and Ruben Gallego in Arizona, among others. They spent over $10 million in California to defeat crypto critic Katie Porter in a Senate primary against the more pro-crypto Democrat Adam Schiff, and they spent more than $2 million against Jamaal Bowman, a New York Democrat who had denounced crypto. After Bowman’s defeat, Tyler Winklevoss took to X with a warning: “Politicians everywhere need to understand that this is what happens when you pick a fight with the crypto army.” He had reason to gloat: of the 58 House and Senate races Fairshake entered, their favored candidate won in 53 of them. As the dust settled on the 2024 election, Winklevoss and the other major crypto players would find their interests now thoroughly represented throughout the federal government.
Of course, their biggest win was in making an avid crypto fan out of Trump, who, once in office, wasted little time repaying his donors’ largesse. In February he appointed a swath of pro-crypto officials to run major financial regulatory agencies: Paul Atkins as Chair of the Securities and Exchange Commission (SEC), Scott Bessent as Treasury Secretary, and Jonathan Gould as comptroller of the currency. And he created a whole new position, “AI and crypto czar,” to which he appointed David Sacks—who, in his first press conference, would declare triumphantly that “the war on crypto is over.”
At this point it should be clear that the speed, scope, and scale of crypto’s rise from the ashes reflects the success of a political project much more than a purely economic one. But just what does this project seek to accomplish—and at whose cost? By harnessing the greed and corruption of the Trump family and its cronies, as well as many Democrats, the crypto industry has assembled a juggernaut of power that aims to revolutionize the financial system to place crypto and their businesses at the center of finance, not just in the United States but throughout the globe. The most immediate economic risk of this is the prospect of a crypto-induced financial crisis—a danger exacerbated by the industry’s ever-tighter entanglement with the looming AI bubble.
But Trump and his tech-sector allies do not plan to stop there. Not only do they want to take over the private financial system; they also want to privatize the most important public financial asset in the world economy: the U.S. dollar. By tying crypto to the dollar through so-called stablecoins, they hope to reap the rewards accruing to the United States by the singular role its currency plays in the global economy—a project whose success depends on Trump’s political power, the continuous (and increasing) support of the U.S. Treasury and Federal Reserve, and a barrage of deregulation to clear the way.
For now, Trump and his family are happy enough to use their ties to the crypto industry as a moneymaking venture. Through the release of the $TRUMP and $MELANIA memecoins and a large stake in World Liberty Financial, a crypto-connected financial enterprise founded by Trump and his Middle East envoy, Steve Witkoff, the Trump family has increased its wealth by billions (exact estimates vary). In August, New Yorker staff writer David D. Kirkpatrick estimated judiciously that 70 percent of the $3.4 billion the Trump family has made from exploiting Trump’s role as president so far has come from crypto-related ventures. Much of the finance inflow has come from abroad.
For many crypto titans, the real value in such investments lies in the access to the Trump family and the favors it makes possible. A case in point is the set of deals the Trump family made with the United Arab Emirates (UAE). Last January, it agreed to sell a 49 percent stake in World Liberty Financial to an Abu Dhabi sheikh for nearly half a billion dollars. Months later, a government-backed firm in the UAE bought $2 billion using cryptocurrency offered by World Liberty Financial, while Witkoff negotiated the selling of highly advanced computer chips to the UAE government at the same time. Together, the deals allowed a foreign government to forge extraordinarily close ties to the president—and generated hundreds of millions of dollars for the Trumps and their associates.
Fairshake PAC’s favored candidate won in 53 of the 58 House and Senate races it entered.
Playing a major role in the latter deal’s financing was Changpeng Zhao, perhaps the world’s richest crypto capitalist and the main owner of Binance, perhaps the largest crypto trading platform. Prosecuted during the Biden administration for money laundering to terrorist groups (among others), Zhao served four months in prison and stepped down as chair of Binance in 2023. But in October, Trump pardoned Zhao, leaving him free to retake management control of Binance—and, evidently, to join team Trump.
Given the growing roster of crypto titans he now counts as allies, it’s little surprise that Trump, upon taking office, introduced a sweeping set of deregulatory measures designed to take the heat off of them. In February, Trump signed an executive order “pausing” enforcement of the Foreign Corrupt Practices Act for 180 days. In April, the administration disbanded the Department of Justice’s (DOJ) entire National Crypto Enforcement Team. That same month, the DOJ would issue a memo announcing it would no longer investigate or bring money laundering or illicit finance cases against trading platforms, digital wallets, or anonymity-boosting services known as mixers and tumblers. And the SEC, now in the hands of Trump loyalists, slashed its crypto enforcement staff and dropped investigations and lawsuits—especially against crypto companies that had direct ties to the Trump family.
Despite being called a currency, crypto lacks one of the most important characteristics that a currency should have: a stable value. Cryptocurrencies have proved far more unstable than other financial assets and certainly more unpredictable than the value of the dollar, which has fallen in recent years by 2 to 3 percent a year (the rate of inflation). Admittedly, most of crypto’s fluctuations have not reached hyperinflation extremes, but some cryptocurrencies have completely collapsed in value (in fact, according to one estimate, more than 50 percent of them have failed since 2021). For those who want to expand the use of cryptocurrencies, such volatility poses serious problems. Enter stablecoins, assets that are designed, as the name suggests, to hold a stable value by tying their values to that of another important asset, such as the U.S. dollar. If successfully locked in one-to-one with the U.S. dollar, stablecoins would only vary to the same degree as the dollar does. First and foremost, stablecoins promise to expand the market for crypto assets and enhance profits for those who own them.
What can go wrong? The answer partly depends on how well stablecoins are regulated and by whom. That’s where the GENIUS Act (short for “Guiding and Establishing National Innovation for U.S. Stablecoins Act”) comes in. It was signed into law by Trump in July, after passing the Senate with 50 Republican and 18 Democratic votes and the House with 206 Republican and 102 Democratic votes. The act provides a highly permissive legal framework for wannabe stablecoin purveyors by allowing both banks and non-banks to issue stablecoins: now, JPMorgan Chase, asset managers like BlackRock and Fidelity, and even non-financial corporations like Amazon or Walmart can all issue them.
The ever-tightening crypto chokehold heralds both the naked extraction of more wealth by a relatively few capitalists and the severe risk of a massive financial crisis.
When you put $100 into your checking account, you have the right to withdraw your dollars on demand, and the bank is required to give them to you: banks are required to have deposit insurance so that if there is a run, you can still get your money back. They are also required to keep a certain amount of capital on hand, so that if they lose money, its owners still must pay up. Regulatory rules limit the types of assets banks can invest in, to discourage high-risk investments. The GENIUS Act imposes none of these rules on institutions that issue stablecoins. It prohibits them from paying interest on deposits, in order to protect traditional banks from competition, but it also allows them to get around these restrictions by offering rewards—so deposits are likely to flee from banks subject to regulations and safeguards to crypto purveyors that aren’t.
It is unclear how successful these purveyors will be in maintaining stable links to the dollar, but history suggests the likelihood of serious problems. Economic historian Barry Eichengreen has documented how chaos ensued when local banks issued their own currencies in the mid-nineteenth century, the period sometimes referred to as the “wildcat banking” era. Back then, shopkeepers and farmers had a hard time determining which currency was stable and which was not, because bank runs were so common. As a result, the Lincoln administration enacted several laws to place the national banking system under stricter regulation.
Today, we are inching closer and closer to the wildcat days. Some stablecoins, such as Tether, have been pushed off their pegs to the dollar multiple times, leading to a collapse in the cryptocurrency’s value. The 2023 bank runs on Silicon Valley Bank, Signature Bank, and Silvergate Bank were partly the result of their ties to the crypto industry. Although the GENIUS Act purports to avoid these problems by requiring stablecoin issuers to keep high-quality assets such as short-term U.S. Treasury securities on hand to guarantee deposits, they have every incentive to cheat. Holding safe assets earns them very low returns; if they can take some of the investments and buy riskier assets, they can earn a lot more money. We have every reason to believe that this is what they will do.
Joining the GENIUS Act is the Clarity Act, which has passed the House and is awaiting approval by the Senate. If signed into law, the legislation will lead to the near-total deregulation of crypto, gutting almost all financial regulations and monitoring mechanisms that could place limits on the system. At the same time, as a law, it creates a patina of legitimacy for “whatever goes” finance. The coalition group Americans for Financial Reform has mobilized efforts to fight this bill, which would surely usher in a new era of consumer abuse and financial instability, but as of this writing, the act is closer than ever to passing. And even if it does not pass, the GENIUS Act, combined with the administrative decisions made by the now firmly pro-crypto financial regulators, are enough to tear down the guardrails on their own.
The roster of Trump supporters with much to gain from crypto is a who’s who of tech and finance capitalists. These include the usual suspects: the so-called “PayPal mafia,” billionaires who got their start with PayPal, notably Peter Thiel and David Sacks; Marc Andreessen of Andreessen Horowitz, a former Democratic supporter turned Trump fundraiser; and Zhao, perhaps the wealthiest crypto maven in the world. But they also include a host of no less powerful people who like to fly further under the radar: Brian Armstrong, co-founder and CEO of Coinbase; Justin Sun, the crypto entrepreneur and top investor in the $TRUMP coin; and Michael Saylor, the billionaire who has supported Trump’s plans to create a national Bitcoin reserve.
Over the past year, most of these allies have enjoyed the freedom—and lucrative returns—brought on by the new (de)regulatory environment. But some, it appears, are thinking even bigger, with a fever dream to turn the libertarian vision of decentralized finance without government on its head by privatizing and taking over the financial system in as much of the world as they can. This is no classic libertarian vision of “free banking,” which wants the system completely privatized without government backing. On the contrary, their vision is that, at least initially, this system will be anchored by the U.S. dollar, and that the government and Federal Reserve will stand behind it, subsidize it, and if necessary, bail it out when it gets in trouble. To do so, they plan to control the system from within by creating an unregulated parallel system based on cryptocurrencies and assets, and allowing—indeed encouraging—banks and other “legacy” financial institutions to integrate them into their overall operations to avoid being outcompeted by new crypto-focused ones.
Stablecoins, the GENIUS Act, and deregulatory decisions at the major financial regulatory agencies like the SEC are at this program’s leading edge. Soon, the injection of crypto into our current financial system via stablecoins and other products, writes Aaron Krolik of the New York Times, may unknowingly involve everyday users of banking, credit cards, saving, and investing. As Timothy Massad, who served as the Treasury Assistant Secretary for financial stability after the 2008 crash, put it: “The line between betting, speculating and investing has largely disappeared.” (Such matters, it turns out, also worried John Maynard Keynes with respect to Wall Street in the run-up to the 1929 crash.)
This ever-tightening crypto chokehold heralds a number of problems. One, of course, is the naked extraction of more wealth by a relatively few wealthy cryptocapitalists, especially those with ties to Trump and his family. The other is a severe risk of a massive financial crisis—not only because of the same risks of deregulation that caused the 1930s and 2008 breakdowns, but because, as economist Hélène Rey points out, crypto is subject to hacking and manipulation that could cause a situation to spiral further out of control.
What are the prospects for a crash? Typically, risk is high when the value of financial assets is inflated or volatile. In trying to determine the values of financial assets such as the price of Apple or Ford Motor stocks, mainstream economists focus on what they call “fundamentals,” the profits that can be reasonably expected a company will earn over the foreseeable future. If buying a share of stock makes one a partial owner of a company and entitles them to that share of the company’s profits, then it makes sense to think of reasonably expected future profits as a fundamental determinant of the price a stock owner would be willing to pay for a share. A related determinant is risk: if the uncertainty surrounding the forecast of future profits is high, then investors might be willing to pay somewhat less for their slice of expected future profits.
But as Keynes has pointed out, in many common circumstances, these fundamentals are not even close to being strong enough to nail down equity prices. For one, there can be considerable uncertainty about a company’s future profitability, especially if the overall economy is uncertain, or if the company or product is new and untested. A second, related reason, according to Keynes, paradoxically, has to do with the ease with which investors can buy and sell stocks—what economists sometimes call the “liquidity” of stock markets. If investors have a lot of uncertainty about future fundamentals, they can still make money by just following the investor crowd’s gossip and rumors. If the crowd believes that other investors are going to buy an asset because it is getting hyped by the president of the United States, then they will buy it too. If they start sensing news that “the markets” are turning sour on a stock, they might try to get ahead of the markets and dump it. In a world of great uncertainty and high liquidity that makes it easy to buy and sell, short-term guesses and rumors rather than longer term fundamentals will rule investor behavior.
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Crypto, of course, is an asset ripe for hype and rumor. Because it does not work as a medium of exchange (like actual money), or generate a rate of return (because it generates no income), its value stems from its utility in skirting the law—tax evasion, buying and selling illegal products, and the like—and as a vehicle for speculation on its own ups and downs. In the latter case, its value is determined almost entirely by how much hype people believe that other people believe, even if they don’t believe it themselves.
MIT economic historian Charles Kindleberger and his colleagues, Robert Aliber and Robert N. McCauley, have developed a framework of financial “manias, panics, and crashes” that is useful for understanding crypto’s fluctuations. Some crises, they argue, involve speculative bubbles followed by crashes, like the Dutch tulip bubble of the 1600s or the real estate sub-prime bubble of the mid-2000s. In each case, the bubbles exhibit a characteristic pattern: first, there is an initial exogenous event, or displacement, that sets off an asset price rise, which gathers momentum and becomes a boom. As the boom continues, investors begin to check their reason and caution at the door. Euphoria, or what Alan Greenspan called “irrational exuberance,” takes hold. Then some investors begin to see weakness in the boom and start selling in an increasing wave of profit taking; as profit taking takes hold, investors run for the exits as panic selling—often at a loss—takes over.
Crypto’s recent history is a case study. In late 2024, displacement started moving crypto prices up. Momentum soon accumulated into a boom as the Trump family and allies made more crypto deals, created a federal “crypto reserve,” directed their financial regulators to ease restrictions on crypto, and ultimately passed legislation to create a “non-regulatory” set of regulations for crypto. Boom soon led to euphoria as crypto prices started climbing into the stratosphere. By late October 2025, profit taking crept in and prices started to fall dramatically, in a nosedive from which it has not recovered.
Instead of leading the opposition to Trump’s crypto plans, many prominent Democrats have stood meekly by—or worse, encouraged them.
The overall size, growth rate, and destructiveness of these bubbles—both on the way up and on the way down—is much greater if they are fueled by leverage. If you pay $100 for an asset, but borrow $80 to buy it (so you only put $20 of your own wealth into it), if the price of the asset drops by just 50 percent ($50) then you not only lose your whole investment, but you have to come up with $30 someplace else to repay your debt. In a 2024 study, the Federal Reserve Bank of New York warned of crypto’s risks to financial instability, including problems with excessive leverage. They highlighted crypto firms advertising debt-to-asset ratios of one hundred, a highly significant level of leverage. Crypto bets in derivatives, they pointed out, also involve high risks that amount to high leverage, because small bets can lead to large gains or losses—and the latter often have to be made up by selling other assets. (The downturn is further made worse if there is a lack of clarity in the market as to where the skeletons are buried: which institutions are holding bad assets, how much have they borrowed to buy these assets, who have they borrowed from—and who might not get paid if the bubble crashes.) In other words, leverage, interconnectedness, and transparency determine the amount of collateral damage from a bubble crash—and the crypto economy is at once leveraged, interconnected, and exceedingly opaque.
Because crypto does not have any intrinsic value, its value could fall very far—indeed, all the way to zero, as has happened with many cryptocurrencies. But if the government is committed to bailing out (putting a floor under) the value of some crypto assets, that will embolden private investors to buy. That Donald Trump and his family are now major crypto investors almost certainly suggests to other investors that his administration would never let the values of these assets collapse. Were such a bailout to take place, the big investors would keep their money while the economy around them is steadily drained.
Multiplying the dangers from crypto is the fact that it is expanding in an economy increasingly dominated by another very risky technology: artificial intelligence. The AI equity bubble and data center building spree, increasingly financed by risky transactions, creates an independent vector of economic, financial, and environmental risk in the U.S. economy. Not only can crypto risks be exacerbated by the those associated with AI; crypto can also increase AI’s dangers at the same time.
The clearest connection between the two industries is in their compounding of environmental risks. Server farms associated with crypto mining piled on top of massive computer data centers being built by AI companies dramatically worsen the environmental problems of fossil fuel use, water shortages, land scarring, and community disruption. But there are other emerging interactive threats, too. Generally, crypto asset prices are highly correlated with the stock market (by some measures, in fact, crypto prices over-react to changes in the stock market). Today, we seem to be experiencing not only a bubble in crypto asset prices but also a bubble in AI-related equity prices, especially in the prices of the so-called “Magnificent Seven” companies that dominate the stock market: Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla, whose stocks now account for about a third of the total value of the stock exchange. If these stocks were to precipitously decline in value, then so too would crypto—potentially leading to a two-headed crisis in both the traditional and crypto markets.
The financial system is becoming increasingly fragile because of deregulation, increased leverage, and reduced transparency. All this implies that a shock to one part of the system—for example, the equity values of the “Magnificent Seven”—is more likely to have unpredictable and serious negative knock-on effects elsewhere.
But perhaps the biggest danger of the interaction between crypto and AI is the political connection between the two. Under the tenure of their newly purchased champion Donald Trump, the techno-industrial elite—or as political scientist Thomas Ferguson calls them, “red tech”—have become dangerously powerful. A glance at the high-tech billionaires who attended Trump’s inauguration gives one window into this bloc: Mark Zuckerberg (Meta), Elon Musk (Tesla, X), Jeff Bezos (Amazon), Sundar Pichai (Google) and Tim Cook (Apple). Add to that list the investors behind the crypto PACs, and, as Ferguson rightly points out, military contractors and oil and gas executives, and one gets a full picture of the coalition feeding the Republicans, many Democrats, and, of course, Trump himself.
Especially now that this bloc’s reach extends to a number of key congressional Democrats, there is an increasingly high likelihood for a government bailout of both crypto and AI, should their connected bubbles burst. Indeed, we have already witnessed some take place. In November, Bessent and the Trump administration promised to lend up to $20 billion to Javier Milei in Argentina to help him win re-election, partly because of failed financial bets made by U.S. hedge funds in Argentina. And in December, Trump pumped up AI values by issuing an executive order to try to prevent states from regulating the
technology themselves.
While the crypto and AI madness is at the leading edge of the economic insanity stalking the country, it is only the most visible symptom of a deeply destructive political bloc taking control over our government. Bringing sanity to the asylum is no simple task, but the fact that we are teetering on the precipice of a highly probable financial crash ought to focus our attention on doing so. Trump and his allies figure that they can push the system as hard as it can go, and if it cracks, the government can just bail them (if not the economy) out. In the meantime, they will continue to privatize and take control over the monetary and financial system.
A three-pronged strategy could, in principle, prevent this. First would be to restore financial regulations to prevent the unchecked spread of crypto and stablecoins into the financial system. This would require repealing the GENIUS Act, restoring financial stability-based perspectives on crypto at the SEC and other regulatory agencies, restoring money laundering and fraud prosecutions by the Justice Department, and reaffirming the financial stability rules embodied in the Dodd-Frank Act, imperfect as these are.
Second would be to reinforce support for public digital payments systems, including those outlawed by the GENIUS Act. And third: no bailouts for the crypto and AI capitalists at the expense of the rest of the country. When the crypto bubble bursts, the Federal Reserve and Treasury should keep the payments systems working, protect people’s savings, and keep employment humming by using fiscal support if necessary, as it did during the COVID shutdown. But above all, make the tech broligarchy take the hit.
Still, an unsettling question looms: Is there sufficient political will to accomplish any of this? Instead of leading the opposition to Trump’s crypto plans, many prominent Democrats have stood meekly by—or worse, encouraged them. In the meantime, the crypto money that wracked the 2024 contests is worming its way into the next cycle. Recent reports show that crypto interests are amassing more than $250 million for the 2026 elections to get even more pro-crypto candidates nominated and elected to Congress while driving out the candidates standing in their way. Increasingly, they are focusing on Democratic primary races, and even state-level Democratic committees, in an attempt to insulate themselves from the effects of a possible Republican defeat.
Within the party, there is a battle raging between progressive, anti-crypto Democrats—like Representatives Alexandria Ocasio-Cortez and Pramila Jayapal and Senators Elizabeth Warren and Bernie Sanders—and the corporate, pro-crypto wing led by Senator Chuck Schumer. Joining the former in their fight against the crypto takeover are reform groups like Americans for Financial Reform and Better Markets, who have mobilized supporters to sign on to letters, lobby, and demonstrate. Yet as long as the new wave of Democrats allied to the crypto industry continues to gain a foothold in the party, it will be an uphill battle.
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