Crypto executives are bracing for a painful reckoning after Democrats won the US midterm elections and vowed to investigate the Trump family and its ties to the industry. Democrats made the president's alleged self-dealing and "crypto pay-offs" a defining issue, helping them win in Republican strongholds. Donald Trump, who vowed to make America the "crypto capital of the world," pursued aggressive deregulation since taking office, signed landmark legislation and pardoned executives such as Binance co-founder Changpeng Zhao.
However, digital assets have been highly profitable for Trump personally, who earned more than $1.16bn in crypto sales and token royalties last year. He has sold memecoins offering access to him, launched crypto ventures under scrutiny for foreign investment, and accepted donations from crypto executives for projects like the new White House ballroom. Congressman Robert Garcia, who will chair the House oversight committee from January, said Democrats will be "focused like a laser" on investigations into the Trump family and their crypto profits.
The Democrats' victory heralds a potentially painful chapter for the industry, which had boomed under Trump. That victory came despite the sector ploughing nearly $200mn into the midterms through the Fairshake Super Pac — funded by companies including Coinbase, Ripple and Andreessen Horowitz — and a separate Pac supported by stablecoin giant Tether. The donors lost many of the races they backed.
With majorities in both chambers, Democrats now have the power to issue subpoenas, which, if ignored, can lead to civil or criminal penalties. Ron Hammond, head of policy and advocacy at crypto market maker Wintermute, advised firms to get ready to answer congressional inquiries directly. A large portion of Trump's crypto profits has come from the family venture, World Liberty Financial, which will become a key focus for a Senate committee on investigations chaired by Richard Blumenthal, examining the illicit use of cryptocurrencies.
Others in the industry who have benefited under the administration also face scrutiny, with Blumenthal sending notices to Binance over alleged Iran-connected money laundering and to Tether over alleged policy influence.
Source: Financial Times Markets · Summarized by HeadlinesBriefing