President Donald Trump has pledged to transform the US into the crypto capital of the world. He is taking a much looser approach to regulating digital currencies, which caused leading cryptocurrencies, including Bitcoin, to surge in value since his election victory in November. Following the rise of digital currencies, the crypto-friendly president and his wife launched their coins ahead of his inauguration last week. After launching his memecoin, $TRUMP, even though it has dropped down to approximately $35 as of today, on Friday, it soared in value from $8 to nearly $75 by Sunday, according to CoinMarketCap.
Memecoins work almost exactly like other well-known digital currencies; they provide a decentralized environment for transactions based on their blockchain technology. The difference is that while the value of traditional cryptocurrencies like Bitcoin or Ethereum is determined by technical innovations or the underlying blockchain network, the memecoins derive their value primarily from their popularity and social media presence, as the famous meme cryptocurrencies like Dogecoin started as jokes. They riff on two prominent features of the digital economy: memes and cryptocurrencies. The former is an online image or video clip that is endlessly tweaked and recycled on social media. A cryptocurrency is a digital asset built on top of a blockchain, a decentralized ledger that tracks the ownership of a cryptocurrency or other digital asset. Users can buy, hold, or trade memecoins on various crypto exchanges, with their value settled mainly by their supply and demand. Cryptocurrencies are not issued or controlled by any central authority, and memecoins are warned to be unpredictable and volatile. "Engaging with memecoins carries risk and is something you should only attempt armed with research and experience.”, says Coinbase. The $TRUMP's website, GetTrumpMemes.com, features similar disclaimers that prove this point further on, as a disclaimer adds that the coin is "not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type," and it is there to “celebrate & have fun!”
The deal comes at an opportune time for Trump since Trump Media is running on fumes. In the first three quarters of last year, it lost $49m and had just $1.8m cash on hand as of September. In addition, in February, Mr. Trump was fined nearly half a billion dollars for fraud at his property business.
However, former government ethics officials and presidential experts said the memecoin business amounted to a “shameful conflict of interest.”. Trump was accused of corruption as he returned to the White House days after launching the multibillion-dollar cryptocurrency. Trump “does not seem to worry about the public interest concerning cryptocurrency,” added Thurber. “He seems to be driven by profit and wanting to be a major part of the billionaire class in the US.”
The $TRUMP coin could serve as a conduit for bribery or undue influence. Individuals or foreign entities might purchase large amounts of the coin to curry favor with the president, effectively depositing money into his personal assets with minimal transparency. This scenario poses risks of foreign interference and violations of the Constitution's emoluments clause, which prohibits federal officials from receiving gifts or payments from foreign states without congressional consent. “These coins open a channel for him to receive financial benefits from foreign adversaries and to prioritize his personal interests, to the collective detriment of Americans,” says Puja Ohlhaver, a lawyer affiliated with Harvard’s Allen Lab for Democracy Renovation.
Seeing Trump’s memecoin from a skeptical perspective can be supported by last month’s meme scandal of Hailey Welch. Her “hawk coin,” after the popular internet meme, had further pushed memecoins to the aspect of gambling instead of using them as an investment. The Hawk memecoin was worth $490m (£385m) hours after it launched on 4 December but now has a market capitalization of a mere $17m. She was immediately accused of ripping off her social media followers as the crypto commentator Stephen Findeisen described the launch as a “rug pull”—the term for when developers hype a crypto scheme for short-term gain and then shut down the project.
Sam Baker, a UK-based memecoin trader, says a lot of the coins’ launches are based on internet trends and rely heavily on influencers to push them on a range of channels from Discord to X and Telegram. “It is a pure form of gambling,” says Baker. “It is like buying a lottery ticket." He acknowledges there is “no intrinsic value” in memecoins and no “rhyme or reason” to which ones will succeed. Recent launches include coins based on the new Squid Game series on Netflix and the fall of Bashar al-Assad’s regime in Syria.
One of Trump’s key backers, Elon Musk, is a longtime supporter of the first-ever memecoin, Dogecoin, based on a meme featuring a Shiba Inu dog. Launched as a parody of the crypto market, Dogecoin is now worth a more serious $60bn, even if its direct use in transactions is limited to a few businesses such as Tesla, where Musk is chief executive.
Ethics advisors and industry experts say this investment is different because his administration will regulate an industry in which he has a stake through the new token and where any value is arguably tied to his presidency. The companies behind the Trump token, CIC Digital LLC, an affiliate of the Trump Organization, collectively own 80% of the tokens, meaning that Trump-linked businesses could have gained $8 billion worth of crypto over the weekend.
Prominent crypto investor Nic Carter said on social media the creation of personal meme coins "opens the door to secretive foreign buyers trying to curry influence with our leaders." Some Democratic US lawmakers echoed the national security concerns and conflict-of-interest worries. "Anyone globally, even individuals who have been sanctioned by the U.S. or banned from our capital markets, can now trade and profit off of $TRUMP through various unregulated platforms," US House Financial Services Committee top Democrat Maxine Waters wrote.
Perhaps more dangerous than financial losses brought upon supporters, the Trump memecoin could also act as a new vector for bribery, claims Jacob Silverman, coauthor of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. By investing large sums into a cryptocurrency in which Trump has a large financial interest, thereby driving up its price, politically motivated actors could curry favor with the president without any direct transaction taking place, he alleges. “These are channels for influence and leverage of a kind we haven’t seen before,” claims Silverman.
The release of an official Trump memecoin marks the latest development in the president’s ongoing affinity with crypto. Though in his first term, Trump rejected Bitcoin as a “scam,” he performed a complete change of face in the leadup to the 2024 presidential election. As crypto industry figureheads supported his presidency and threw hundreds of millions of dollars in donations at pro-crypto super political action committees, Trump has recreated himself as the “crypto president.”.
Edited by: Yağmur Ece Nisanoğlu