Trump faces crypto world backlash after launch of meme coin

President Trump is facing backlash after he and first lady Melania Trump launched two cryptocurrency tokens just days before his inauguration.

While the move sparked predictable criticism from political opponents, it was also met with mixed reactions in the crypto world, which largely welcomed his return to office and newfound support for the industry.

The digital currency industry has expressed optimism Trump will roll out more crypto-friendly policies, but now some are concerned his recent launch of two meme coin tokens will cast a negative light on his efforts to boost crypto.

“It undermines the seriousness of any liberalization of regulations that Trump undertakes for the crypto space because it makes it look self-interested,” said Nic Carter, a founding partner at crypto investment firm Castle Island Ventures.

“It makes the industry look bad and … kind of takes away some of the impact of what Trump was going to do for the crypto industry,” added Carter, who noted he has been a public supporter of Trump but does not agree with some of his crypto policies.

The White House, nor the companies behind the meme coins, immediately responded to The Hill's request for comment.

But Trump himself shrugged off concerns raised by his meme coin during Tuesday remarks at the White House.

“I don’t know much about it other than I launched it. I heard it was very successful. I haven’t checked it, where is it today?" Trump said.

“You made a lot of money, sir,” the reporter replied.

“How much?” Trump questioned.

“Several billion dollars it seems like in the last several days,” the reporter said.

The president shrugged off the comment, saying several billion is “peanuts” for the people he’s spent the last few days with.

Meme coins are cryptocurrencies that are usually based on internet trends and start with no inherent value. Their value can surge when there is a high demand, making them a highly volatile asset.

Trump last week launched his first meme coin, $TRUMP, which quickly surged in value and jumped from $10 each to about $70 in the first 48 hours. Melania Trump announced another meme coin for her, $MELANIA, on Sunday, one day before Trump was sworn into office.

$TRUMP traded at about $43 and $MELANIA traded at around $4 as of Tuesday afternoon.

The launches followed the first-ever “crypto ball,” hosted Friday by Trump’s artificial intelligence (AI) and crypto czar, David Sacks, who told the crowd the “reign of terror against crypto is over.”

Despite past skepticism of digital currencies, Trump has since embraced the industry, which was largely at odds with the Biden administration over Washington’s crypto-critical approach.

Trump is largely expected to issue an executive order related to crypto this week, though it is not yet known what will be included.

The industry hopes Trump will usher in more clear and transparent rules surrounding crypto, especially as hard-line critics like former Securities and Exchange Commission (SEC) Chair Gary Gensler depart the scene.

The tone in Washington is already changing towards crypto and the SEC launched a “crypto task force,” on Trump’s second day in office.

The president nominated former SEC Commissioner Paul Atkins, a crypto advocate, to replace Gensler, and Trump and his sons launched a new cryptocurrency platform last year called World Liberty Financial.

With the critics out, those in the crypto space hope their work will be taken more seriously after several scandals roiled the industry’s status in Washington.

But the joking connotation of some meme coins could threaten this goal, observers suggested.

“I don’t think coins of this nature improve the odds of crypto being taken seriously by the mainstream financial participants,” said Steve Sosnick, chief strategist at Interactive Brokers, a brokerage firm.

“Throughout his career, Donald Trump has been masterful at turning his name into financial success. This is certainly the most recent and perhaps the most extreme … and you do have to wonder how much of that mentality was behind his embrace of crypto,” he added.

Additionally, some industry players are concerned the move could put Trump under an ethical spotlight given how much money he and his wife could stand to gain from the venture.

“This is different from publicly traded securities, so it’s the obvious risk that anyone now could just buy Trump’s or Melania’s meme coin as a way to indirectly fund the administration or Trump himself or whoever’s behind these coins in a very opaque way,” Carter said.

Meme coins are often traded on a decentralized exchange where people can anonymously trade assets. In turn, this makes it more difficult to monitor transactions and creates a gray area in terms of what trades regulators and the public can see.

In some cases, Trump, Melania or the companies behind the meme coins also might not be able to see the buyers, Carter noted.

“The problem here is that most meme trading activity happens on the blockchain between counterparties that don’t know about who the other one is,” he said.

It is unclear if Trump could face any legal challenges because of this conflict of interest or whether he could be held liable for any lost money among traders.

“The real question is, are meme coins even a financial product to begin with? How is this different than a baseball card?” said Katherine Kirkpatrick Bos, the general counsel for cryptography software company StarkWare.

There is still disagreement in Washington over whether meme coins and other crypto products should be classified as a security, which would subject them to the SEC, or as a commodity, which brings in the Commodity Futures Trading Commission (CFTC).

“There is a high degree of legal and regulatory uncertainty with meme coins,” Bos told The Hill. “I think that the hope from the crypto bar and from crypto is that the civil regulators, the SEC and the CFTC will spend their time and focus going after wrongdoers as opposed to meme coins that operate in the gray area of regulatory uncertainty.”

Whether the hype around the Trumps’ meme coins will last remains to be seen.

“We’ve seen massive volatility with meme coins,” Bos said. “Only a very, very, very small percentage of meme coins have actually proved to hold their value in the long run.”

Trump’s meme coins likely attracted a lot of traders who have never or do not usually trade crypto or meme tokens, raising the possibility of scams or the loss of significant amounts of money for some.

“If Trump’s bringing his maybe not as technically sophisticated supporters on chain to trade this thing, they’re going to lose money. Like they’ll find a way to get hacked or lose their key,” Carter said.

Shehan Chandrasekera, the head of tax strategy at CoinTrack, said he was “shocked” and a “bit concerned” when he saw the meme coins launch.

“You’re setting a bad example because maybe Trump and Melania wanted to kind of spread the word about crypto, I don’t know, but now there’s professional scammers who kind of want to run the same thing,” he told The Hill. “Now they’re like, ‘if the president can do it, why can’t I do it?’”

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