Tag: Coin

New York
CNN
 — 

President Donald Trump promised crypto investors he’d usher in an era of legitimacy for an industry that’s long been relegated to the financial wilderness — dismissed by some mainstream investors as an highly speculative bet at best or an elaborate Ponzi scheme at worst.

But days before his inauguration, Trump shocked many of his crypto supporters by peddling a digital token known as a meme coin, a functionally worthless asset that trades on hype and are a go-to vehicle for scams known as rug pulls.

To be clear, not all meme coins are scams, and the $TRUMP and $MELANIA coins appear to have safeguards built in to prevent a rug pull. Specifically, the Trump coin’s website says its majority holders are subject to a three-year unlocking schedule, so they can’t sell all at once. But even without selling a single token, the Trump Org. had raked in an estimated $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 pulls, in which developers launch a coin, run up its price and quickly cash out. If that sounds familiar, the “Hawk Tuah” influencer Haliey Welch was recently sued over her own coin, which briefly soared to a $500 million market cap before falling 90%. Welch said in a statement posted to X last month that she takes the situation seriously and is working to help affected investors.

Meme coins represent the absurd, at times fraudulent, side of crypto that the increasingly wealthy proponents of the widely traded bitcoin and ether would like to move past. The fact that America’s first “pro-crypto” president is hawking a token with no tangible utility has some in the industry concerned about Trump and his advisers’ judgement as they prepare to overhaul the US regulatory regime with a new zeal for digital assets.

“Trump needs to fire his crypto advisors, from top to bottom,” tweeted Gabor Gurbacs, founder of digital asset firm Pointsville.

One giant ethical concern centers on Trump’s majority ownership of the tokens: 80% of the coin’s supply is held by Trump Organization affiliates 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 an X post Saturday: “I am extremely proud of what we continue to accomplish in crypto. $Trump is currently the hottest digital meme on earth.”

“Even meme coin enthusiasts are skeptical of projects where the majority of tokens are not held by a broader community and appear to be designed in way that disproportionately benefits insiders,” Gareth Rhodes, managing director at advisory firm Pacific Street, told me. “But it is early, and the launch team can still take action to make it a more community-focused project.”

Ethics experts swiftly decried the apparent conflict of interest.

Walter Shaub, the ethics watchdog who clashed with Trump during his first term before stepping down, told my colleague Matt Egan the meme coin maneuver suggests “the very idea of government ethics is now a smoldering crater.”

The Trump administration, which officially entered the White House on Monday, didn’t respond to CNN’s request for comment.

The global $3.5 trillion crypto market is a big tent, and while tokens like bitcoin dominate the industry, the open-sourced, decentralized nature of the blockchain, crypto’s infrastructure, makes it easy for any developer to launch a token, run up the price and walk away with impunity. According to Forbes, between 40,000 and 50,000 new meme coins are created every day, with a combined market value of $100 billion.

People tend to buy meme coins for the novelty, but doing so is about as risky as playing a casino slot machine. Trump’s meme coin shot up after its launch Friday, from about $6.50 to $75 on Sunday, according to data from Coingecko. Then it tumbled, losing more than half its value on Monday as Trump entered the White House without any public nod to his crypto agenda. The price was hovering below $40 Tuesday.

Last week, just a few days before Trump launched his token, the New York State Department of Financial Services issued a consumer alert over “rapidly proliferating” meme coins, which present “exceptional risk of fraud and loss of funds.”

Matthew Homer, a former financial regulator and now general partner of the crypto firm Department of XYZ, echoed a common industry refrain that a lack of regulatory clarity around crypto has contributed to those fraud risks.

The Securities and Exchange Commission’s approach, he said, “created a situation where projects with genuine utility face significant regulatory hurdles, while purely speculative assets do not.”

While bitcoin, the original cryptocurrency, bills itself as a sophisticated innovation with the power to revolutionize the financial system, meme coins have little function outside of gambling. They are also extremely volatile, in part because they’re usually held by a small sliver of investors rallying around a niche, fleeting moment of internet culture.

In other words, they’re not serious, and crypto bulls worry the president’s dabbling will delay progress on the serious issues he’s promised to tackle, like giving investors more regulatory clarity and openness. Plus, it doesn’t help crypto in its yearslong quest to shake its sometimes sketchy reputation if the president regulating the US industry could profit off of it at the same time.

“Generally, the introduction of any meme 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 advisory StoneTurn. But, she said, the Trump meme coins “shouldn’t lead us to presume that the Trump administration will not seek to further the crypto regulatory environment.”

Across the industry, there seemed to be a sense that the crypto adults would simply need to hold their noses through the meme coin drama. It might be embarrassing, but it’s better than suffering under the reign of avowed crypto skeptic Gary Gensler, who oversaw the Securities and Exchange Commission and became an industry bogeyman.

“The industry, whether or not they are fans of meme coins, are excited about a new era for the regulatory approach to crypto,” Rhodes said.