Yesterday US Democrats ramped up their response to President Trump’s family involvement in the cryptocurrency sector and the appearance of conflicts of interest. Democrat Ranking Member Waters of the House Financial Services Committee walked out at the start of a joint hearing with the Agriculture Committee on digital assets, with several other Democrats joining her.
Additionally, Senator Richard Blumenthal, Ranking Member of the US Senate Permanent Subcommittee on Investigations opened a preliminary inquiry into the $TRUMP memecoin and World Liberty Financial (WLF), the cryptocurrency firm majority owned by the Trump family, which recently launched the USD1 stablecoin.
Over the weekend some pro-crypto Democrats withdrew support for the GENIUS Act, the Senate bill that aims to regulate stablecoins. Having received a positive vote by the Senate Banking Committee, the law is up for a vote in the full Senate tomorrow (8 May). The leader of the withdrawal, Senator Ruben Gallego, seemed optimistic about potential changes to the bill ahead of Thursday’s vote, according to Politico.
“I’m hoping we could get it done by then,” he told reporters. “If we can’t then, yeah, then push back. But there’s no reason why we can’t.”
While Senator Gallego could be viewed as pro-crypto, Senator Warren certainly is not. She spoke about the GENIUS Act in the Senate, saying “They’re trying to jam it through because they know it will turbocharge the size and scale of the stablecoin market, and help boost the value of their own stablecoin ventures, all while containing no real restrictions on the President’s self dealing.”
Concerns regarding crypto conflicts of interest
It follows the recent announcement that some $TRUMP memecoin holders would be able to attend a Presidential dinner, while others will get a White House tour. Plus, last week it was revealed the Trump-linked stablecoin USD1 was used as part of a $2 billion transaction by a company (MGX) chaired by the UAE’s national security adviser and brother of the UAE President. Democrats are not alone in raising concerns about some of these steps.
The activities threaten to stall progress on crypto legislation. Stablecoin bills are progressing in both the House and the Senate. Plus, on Monday the House unveiled a new draft law to regulate crypto entities and issuers, after it passed the FIT 21 Bill last year with a significant bipartisan vote. Given FIT 21 did not receive Senate approval, the process has been restarted.
When Representative Maxine Waters was pressed on why she was withdrawing from the House hearing, she said, “I object to this joint hearing because of the corruption of the President of the United States and his ownership of crypto and his oversight of all of the agencies.”
The Republican Chair of the House Financial Services Committee, French Hill, responded, “The Ranking Member has expressed concerns about the conflicts of interests, which is why she’s disrupting today’s joint hearing. With her actions, the Ranking Member has thrown partisanship into what has historically been a strong, good, working bipartisan relationship.” The hearing proceeded without her, and according to Politico, she convened another roundtable.
New investigation into Trump-linked crypto activities
In opening a preliminary investigation into Trump crypto dealings, Senator Blumenthal wrote to Fight Fight Fight, the issuer of the $TRUMP memecoin and World Liberty Financial (WLF).
He asked how they address conflicts of interest. The Fight Fight Fight letters states,
“President Trump’s financial entanglements to the $TRUMP coin, as well as the attempted use of the White House to host competitions to prop up the value of $TRUMP, represents an unprecedented, pay-to-play scheme to provide access to the Presidency to the highest bidder. Chillingly, $TRUMP allows, and even invites, anyone in the world, including foreign governments and unscrupulous individuals, to directly enrich the President, while hiding potential payoffs in the pseudonymity of the blockchain.”
Blumenthal continued that, “the top holder of $TRUMP is Justin Sun, holding nearly 1.4 million coins. Mr. Sun is currently facing a civil fraud case from the Securities and Exchange Commission over allegations of market manipulation and unregistered asset sales, which he is attempting to favorably settle after President Trump’s SEC paused litigation.”
The other Trump venture, World Liberty Financial, arguably owes its success to Sun. It launched a sale of its native WLFI token before the election in October, with President Trump boosting it on social media. For the first month it attracted little interest, even after election. Then Justin Sun bought $30 million of WLFI in late November, raising the token’s profile. Sun added another $45 million in January. Since then the company has attracted numerous partners, including those that have courted controversy. For example, DWF Labs was alleged to have participated in pump and dump schemes, according to the Wall Street Journal.
Against this backdrop of growing controversy, tomorrow’s vote on the GENIUS Act could be a litmus test on whether Trump’s crypto interests could hinder the passage of crypto legislation.
