Why Crypto Could Break the Economy
“We're ready to have another 2008 moment.”
By Eric Gardner, More Perfect Union
When I flew to Miami in late January, the cryptocurrency industry was busy celebrating its newfound power and influence. In the buildup to the 2024 election, the industry combined to raise nearly $200 million, showered it across both parties, and won every election it backed. They even converted Donald Trump. In 2021, he called crypto a “scam”, but by 2022 he pledged to make America the “crypto capital of the planet.”
Many of those involved with the industry knew that Trump’s election meant a friendly regulatory approach to crypto, but even the most optimistic insider couldn’t have known what would happen next. Just on Friday, Coinbase, a major cryptocurrency exchange that faced SEC charges for selling unregistered securities, announced the government was dropping its suit.
Days before his inauguration, Trump launched his own digital token, or meme coin. In the hysteria, the digital asset soared to $75, before ultimately crashing to around $17—minting early traders hundreds of millions while leaving more than 800,000 people with billions in losses.
At WAGM-Miami, which markets itself as one of the largest crypto conferences in the United States, attendees were still wrapping their minds around an American president lending his name to a scheme similar to one that saw celebrities including Lindsay Lohan and Jake Paul charged with violating securities law.
“No one believed it,” Erik Mendelson, a realtor specializing in crypto clients, told me at the conference. Previous administrations, including Trump's first, enforced existing investor regulations against the industry, but that looks to be changing under the new administration.
I headed to Miami to hear firsthand what the industry and its supporters envision for its future under Trump. The mood was electric, with attendees celebrating what they had long viewed as inevitable. Some saw the start of a revolution, with commerce disconnected from corrupt institutions. Others a chance to make easy life-changing money.
Trump has already appointed pro-crypto commissioners to nearly every government agency overseeing commerce. He replaced Gary Gensler, the former MIT professor who regularly sued the industry’s major players for violating U.S. law, with a former crypto lobbyist.
In an early public speech, David Sacks, the president’s crypto and artificial intelligence czar, declared the “war on crypto is over.” To experts outside the crypto space, this new direction is reminiscent of the 2008 financial crisis.
“The crypto industry is basically in lockstep with the U.S. government to dictate policy that is favorable to them, but not necessarily to the American public,” said Molly White, a journalist who has both tracked the industry’s political spending and critically covered their actions.
Right now, that policy looks like the Financial Innovation and Technology for the 21st Century Act (FIT21). The bill, which supporters call a “tripartisan” agreement between Democrats, Republicans, and the industry, would potentially exempt crypto from SEC oversight. Worse, some believe the legislation could inadvertently let non-crypto companies bypass decades of public disclosure requirements simply by putting segments of their business on a blockchain (the technology that underpins most cryptocurrency).
The result could mean that the next crash doesn’t just take out those with crypto, but our entire system. In 2022, crypto infamously collapsed, and $2 trillion worth of bitcoin evaporated in weeks. The lone bright spot was that most of the damage was largely contained to those within the crypto industry. The fear is that the next crash won’t be self-contained.
“A bust is gonna come,” Hilary Allen, a law professor who investigated the 2008 financial crash for Congress told me. “I have no idea when, but when it does, if the traditional financial system and the crypto ecosystem have fully merged, then we're ready to have another 2008 moment.”
Watch our full video to learn more.