MAGA Inc.: The Crypto Czars

A couple of months before the November 2024 election, a curious document landed in investors'  inboxes. Titled the “World Liberty Gold Paper” and emblazoned with a stern-looking picture of Donald Trump in a coin-shaped splash of gold, it announced the Trump family’s entrée into the world of cryptocurrencies. Within a year, half of Trump's estimated US$6.6 billion wealth would come from this new venture.

(Click here for the table of contents of MAGA Inc.: A Guide to Trump's World of Crypto Czars, Tech Titans and Prison Profiteers.) 

The Gold Paper spotlighted two hot new crypto trends that have been widely promoted by some as the future of money but condemned by others as a haven for crime. The first is an alternative banking system called decentralized finance (DeFi), and the second is an alternative money system called stablecoins. (Trump also has invested millions in well-known cryptocurrencies such as bitcoin.)  

Both DeFi and stablecoins depend on the core principle of cryptocurrency, which is the blockchain. A blockchain is essentially a database of transactions. Each transaction is assigned a unique number known as a “block.” Each successive block contains a reference to the previous one, thus creating a unique “chain. Multiple copies of each chain of blocks are backed up across the global Internet. Since this data is collectively managed by all participants, no single person or organization can alter it. Any covert attempt to change transaction details, such as an amount or an address, will create a different block that will immediately conflict with other copies of the data.

While the blockchain is used for a variety of mundane purposes, such as tracking supplies, it has become best known for its ability to track financial transactions. For example, a sum of money from the sale of goods or services can be quickly agreed upon and transferred between two users simply by adding a new transaction to an existing blockchain without needing to use a credit card, bank transfers or physical money.

In addition to bypassing traditional banking institutions, users like such systems because the transactions cannot be smoothly tracked by third parties. Indeed, despite the fact that these transactions are stored in a public database, only the actual users who have access to their own unique identities can read them easily.

These DeFi systems that bypass regular financial institutions started to gain traction in 2020 and were worth some US$150 billion globally by 2025.

A critical aspect of DeFi is yet another crypto system known as stablecoins. Stablecoins are valued based on regular national currencies like the U.S. dollar or the Japanese yen. For example, one stablecoin could be priced at one dollar at all times (hence the name stable). While it might seem unnecessary to buy a stablecoin instead of an actual dollar, users like stablecoins precisely because they are stored and exchanged on the blockchain rather than in physical paper notes with unique tracking numbers and watermarks, allowing them to avoid scrutiny. (By contrast, physical dollar bills are issued by governments and can be tracked by the banks that hold the bills.)

In exchange for cash, commodities or services, users get stablecoin “tokens” that can be used on a DeFi system to move virtual money around the world to buy anything – including illegal drugs or guns – without fear of being caught. The system also helps users bypass sanctions and avoid investigations.

While stablecoin users enjoy the advantage of anonymity, the makers of stablecoins get cash to invest as they please and turn quick profits. This stands in marked contrast to regular banks or investment firms who are required to follow national laws and ensure that users do not lose their money.

So despite the fact that this stable coin system has the theoretical advantage of avoiding scrutiny and wild swings in value associated with cryptocurrencies like bitcoin, several stablecoin operators have failed to properly manage cash investments causing major crashes.