Trump, Crypto, and Banks: A love triangle with trust issues

FIs are unsure whether to swipe right or left on the whole relationship

As I sifted through the recent Trump and financial world shake-ups for this week’s 10Q installment (trust me, there were plenty), I finally zeroed in on today’s story — how crypto is taking on a new life under the president’s watch and what that could mean for Wall Street banks.

In a move that has both crypto enthusiasts and traditional bankers adjusting their spectacles, Trump has gone full steam ahead into the world of crypto. From launching his own DeFi platform, Liberty Financial, to embracing meme coins and reshuffling government positions to favor digital assets, Trump’s dive into crypto is a rollercoaster ride, packed with twists, turns, and high stakes.

For him, these initiatives aim to propel the United States to the forefront of cryptocurrency. 

Some of his pivotal actions in this direction include:

~ From ‘I’m not a fan’ to ‘Let’s make crypto great again’: Rewind to 2019, and Trump was calling Bitcoin a “scam” and tweeting that crypto was “based on thin air.” He’s now one of the loudest voices in crypto, a position solidified by the launch of his World Liberty Financial (WLFI).

WLFI offers lending, borrowing, and yield farming opportunities in a way that, according to Trump, “keeps financial power in the hands of the people, not the globalists.”

The platform operates with a strong focus on stablecoins, specifically those pegged to the US dollar, in an effort to solidify the dollar’s role in global digital transactions. Within weeks of launch, WLFI transferred $307 million in crypto assets to Coinbase Prime, raising eyebrows in both crypto and traditional banking circles.

~ Meme coins FTW? If WLFI was Trump’s serious play into DeFi, his next move was pure spectacle: embracing TrumpCoin (not officially affiliated with him, but heavily inspired). The meme coin skyrocketed overnight after he gave it a nod during a rally, stating, “I hear there’s a Trump coin. Maybe it’s the best coin. People love it.”

While most politicians stay far away from meme coins, Trump has leaned in, fueling speculation that he may formally endorse a cryptocurrency of his own. And in the world of meme coins, a simple tweet or soundbite can send prices soaring — or crashing.

~ Crypto-friendly faces in high places: Trump’s been appointing pro-crypto figures to key government positions.

David Sacks, a crypto advocate, was appointed to lead the SEC (U.S. Securities and Exchange Commission) sparking hopes of a more crypto-friendly policy shift that could ease digital asset integration for financial institutions.

Sacks took to Capitol Hill this week to unveil the administration’s vision for cryptocurrency regulation. The Senate Banking, Senate Agriculture, House Agriculture, and House Financial Services Committees are joining forces to create a bicameral crypto committee. Their main focus is to create a stablecoin bill and set up a federal regulatory framework for digital assets.

The Federal Reserve and FDIC are also considering pro-crypto policy shifts, encouraging deeper institutional adoption. Travis Hill, the acting FDIC chairman appointed by Trump, noted at the Senate Banking Committee this week that the FDIC is reevaluating its stance on crypto regulation to provide a clear path for FIs. The regulator is also revisiting its stance on insuring crypto-related deposits. If crypto firms get FDIC backing, it could make digital assets more palatable to mainstream banks and investors. 

Hill also pointed out that the agency had previously made it harder for banks to engage with crypto, referencing past communications that discouraged such involvement.

Cynthia Lummis, a longtime Bitcoin supporter, was also tapped by Trump for the position of Treasury Secretary. 

Big Banks: Panic, Adapt, or HODL (Hold On For Dear Life)?

Earlier, banks were happy with Trump’s pro-business and deregulation policies. But now, with the new president reshuffling the financial deck and rolling out the red carpet for crypto, banks are likely stuck in a corporate identity crisis. Should they dive headfirst into the DeFi space or stick to the tried-and-true methods that have kept them at the top?

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