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CNN
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President Donald Trump promised crypto investors that he would usher in an era of legitimacy for an industry that has long been relegated to the financial wilderness — dismissed by some mainstream investors as a highly speculative bet at best or a Ponzi scheme at worst elaborated.
But days before his inauguration, Trump shocked many of his crypto supporters by selling a digital token known as a coin, a functionally worthless asset that trades on hype and is a favored vehicle for scams known as rug pulling.
To be clear, not all meme coins are scams, and $TRUMP and $MELANIA coins appear to have built-in safeguards to prevent a rug pull. Specifically, the Trump coin website states that its majority holders are subject to a three-year unlock schedule, so they cannot sell everything at once. But even without selling a single token, the Trump Org. had raked in around $58 million in a single day in trading fees alone, according to crypto researcher and former Coinbase executive Conor Grogan.
Yet meme coins have become known for rug draws, in which developers flip a coin, raise its price, and quickly cash out. If this sounds familiar, “Hawk Tuah” influencer Haliey Welch was recently sued over her own coin, which briefly reached a market cap of $500 million before falling 90%. Welch said in a statement published on X last month that it was taking the situation seriously and was working to help affected investors.
Meme coins represent the absurd, sometimes fraudulent, side of crypto that increasingly wealthy supporters of widely traded bitcoin and ether would like to move beyond. The fact that the first “pro-crypto” US president is selling a token with no tangible utility has some in the industry judging Trump and his advisers as they prepare to overhaul the US regulatory regime with a new zeal for the assets digital.
“Trump needs to fire his crypto advisors, top to bottom,” tweeted Gabor Gurbacs, founder of digital assets firm Pointsville.
A giant ethical concern centers around Trump’s majority ownership of the tokens: 80% of the coin supply is held by Trump Organization subsidiaries CIC Digital and Fight Fight Fight LLC – a concentration that appears designed to personally enrich the president. Trump Org did not respond to a request for comment, but Eric Trump, the company’s executive vice president, said in a post on Saturday: “I am extremely proud of what we continue to accomplish in crypto . $Trump is currently the hottest digital meme in the world.
“Even meme coin enthusiasts are skeptical of projects in which the majority of tokens are not owned by a broader community and appear to be designed in a way that disproportionately benefits insiders,” Gareth Rhodes told me , managing director of the consulting firm Pacific Street. “But it’s early and the launch team can still take steps to make this a more community-focused project.”
Ethics experts quickly denounced the apparent conflict of interest.
Walter Shaub, the ethics watchdog who clashed with Trump in his first term before resigning, told my colleague Matt Egan that the coin flip suggests that “the very idea of “Government ethics is now a smoking crater.”
The Trump administration, which officially entered the White House on Monday, did not respond to CNN’s request for comment.
The estimated $3.5 trillion global crypto market is a big tent, and although tokens like Bitcoin dominate the industry, the open source and decentralized nature of blockchain, the infrastructure of crypto, allows any developer can easily launch a token, increase its price and leave with complete impunity. According to Forbes, between 40,000 and 50,000 new meme pieces are created every day, with a combined market value of $100 billion.
People tend to buy meme coins for the novelty, but this is as risky as playing a casino slot machine. Trump’s coin exploded after its launch on Friday, rising from around $6.50 to $75 on Sunday, according to Coingecko data. Then it plummeted, losing more than half its value on Monday when Trump entered the White House with no public sign of his crypto agenda. The price hovered below $40 on Tuesday.
Last week, just days before Trump launched his token, the New York State Department of Financial Services issued a consumer alert about “rapidly proliferating” meme coins, which pose “an exceptional risk of fraud and loss of funds.
Matthew Homer, a former financial regulator and now general partner at crypto firm Department of XYZ, echoed a common industry refrain that the lack of regulatory clarity around crypto has contributed to these fraud risks.
The Securities and Exchange Commission’s approach, he said, “has created a situation in which projects with genuine utility face significant regulatory hurdles, while purely speculative assets do not.” .
While bitcoin, the original cryptocurrency, presents itself as a sophisticated innovation with the power to revolutionize the financial system, meme coins have little function outside of gaming. They are also extremely volatile, in part because they are typically owned by a small group of investors rallying around a niche, fleeting moment in internet culture.
In other words, they’re not serious, and crypto bulls fear that the president’s intrusions will delay progress on serious issues he’s promised to solve, like giving investors more clarity and openness in regulatory matters. Additionally, it wouldn’t help crypto in its years-long quest to shake its sometimes murky reputation if the president who regulates the U.S. industry could profit from it at the same time.
“In general, the introduction of any coin ruffles the feathers of those who are serious about the use, legitimacy and security of crypto,” said Kyla Curley, a crypto expert and partner at global consultancy StoneTurn. But, she said, Trump’s meme pieces “should not lead us to assume that the Trump administration will not seek to strengthen the regulatory environment for crypto.”
Across the industry, there seemed to be a feeling that crypto adults would just need to hold their noses during the coin drama. It may be embarrassing, but it’s better than suffering under the reign of outspoken crypto-skeptic Gary Gensler, who oversaw the Securities and Exchange Commission and became an industry bogeyman.
“The industry, whether a fan of meme coins or not, is excited about a new era for the regulatory approach to crypto,” Rhodes said.
