Crypto and Trump Corrupted America

It was pitched as the world’s most exclusive invitation. Hundreds gathered at President Trump’s private country club in Virginia in May for a gala evening. Guests included Justin Sun, a cryptocurrency billionaire who, in the Biden administration, was under investigation for suspected financial crimes. He and the other attendees had won their seats by being the top buyers of $TRUMP memecoin, a form of crypto that benefits Mr. Trump’s family.

“There is a lot of common sense in crypto,” said Mr. Trump, as the room was served a meal accompanied by Trump-branded wine and water. “And we’re honored to be working on helping everybody here.” Mr. Sun later expressed gratitude and received an 18-karat-gold Trump Victory Tourbillon watch. And with that, cryptocurrency elided its dark past and ascended to the apex of American power.

Cryptocurrency has found its hero in Mr. Trump. And in this unlikely moment of triumph, its most powerful proponent has laid bare the paradox at the heart of this brave new world of “new money.” Crypto was supposed to free us from the chains of government control, but now it is finally revealing what that freedom really means: removing all checks on the power of the wealthy to do what they want, discharged at last from law, supervision and civic obligation — even if the result is autocracy. Mr. Trump, with his thirst for money and power, has in one fell swoop both exposed and embraced the corruption at the heart of digital currencies — a corruption inherited from the libertarian ideals that created them.

Libertarianism — the decades-old American political movement with an obsessive focus on unfettered individualism and free markets — was, for most of our history, a hard sell. With its roots in both 1950s free-market radicalism and 1960s hedonism, it has lurked on the fringes of American political life with something to offend everyone as libertarians advocated the abolition of, among other things, public schools, environmental protections, the police, the age of consent, the U.S. military and the Federal Reserve. The Libertarian Party languished for decades as a clown show where delegates argued against laws banning child labor, racial segregation and driving without seatbelts.

The movement attracted a diverse crew of antiwar and anti-police activists, gun nuts, anti-tax businessmen, contrarian freethinkers and conspiracy theorists. You may remember Ron Paul with his twinkly grandpa affect, obsession with the gold standard and investment newsletters riddled with racism and homophobia. Karl Hess largely resolved his objection to taxes by conducting his life by barter; Murray Rothbard tried to forge a libertarian alliance partly by supporting Holocaust deniers (despite being Jewish himself). What these intellectuals all shared was a devotion to limiting — or eliminating — the power of the state and replacing it with the power of the market.

Mainstream Republican senators and donors dabbled with libertarianism to advance free-market projects but ignored the rest of the program: yes to cutting taxes, no to drug legalization and shutting down the Pentagon. True believers were studiously kept at arm’s length.

Libertarianism was always an elitist movement. Individual liberty and the destruction of the state’s authority would enable a new elite to take power over the population. Ayn Rand was libertarians’ favorite novelist, after all: Her rich, brilliant supermen despise everyone else, and their victory is the freedom to be in charge at last without rules or laws to restrain their self-interest.

In the 1990s, the internet revolution birthed an obscure technology that seemed almost purpose-built to fulfill a libertarian extremist’s visions: the blockchain. Originally proposed as a way to help authenticate and time-stamp digital data, it offered a way for strangers to maintain a shared digital ledger over the internet. With the blockchain, people could prove ownership of property, transfer or receive online assets and even set up contracts without filing any paperwork, dealing with auditors, banks or regulators, or paying taxes.

The technology soon attracted a following of libertarians, the most extreme of whom had long dreamed of replacing government-regulated banks with a parallel financial infrastructure for untaxable, untraceable, borderless online-only cash. They used the technology to develop cryptocurrencies, the first of which was Bitcoin.

In addition to quirky, high-minded libertarian intellectuals, crypto also attracted criminals. Libertarian projects seem to invariably attract both. By definition, a libertarian tool is a tool to skirt conventional legality, a challenge to existing laws and their legitimacy.

The intellectuals had varied goals. Civil liberties activists wanted anonymous payments for political donations and for financially vulnerable industries like sex work. Ultraconservative policy wonks fantasized about replacing America’s central bank, the Federal Reserve. “Anarcho-capitalists” dreamed of a nerd-warlord society of failed states and corporate mercenaries. The criminals just wanted untraceable currency to hide their illegal activities.

I met many folks from all those groups at libertarian events in New Hampshire in the 20-teens. Some were there for a backwoods prepper-pastoral lifestyle of raw milk, unvaccinated kids, fluoride-free water and assault rifles. People sold “End the Fed” bumper stickers and Ayn Rand novels and shirts announcing that “AN ARMED SOCIETY IS A POLITE SOCIETY.” Some were raising money for the legal defense of Ross Ulbricht, the founder of the dark web drug marketplace the Silk Road, who had been arrested by the F.B.I. Everybody wanted to talk about crypto over snacks of paleo granola and homemade deer jerky.

Then crypto attracted the attention of a few major Silicon Valley investors. Early to the party was Peter Thiel, an extreme libertarian who has long championed a belief in the limits and failings of democratic institutions. He is almost better known for his wild positions — city-state “seastead” tax havens in international waters, and lamenting women’s suffrage — than for his investing acumen.

Mr. Thiel had long suggested that the production of money must be moved from the hands of central banks into the private sector. His original conception of PayPal, which he co-founded in the late 1990s, was intended to fulfill this vision before it eventually morphed into a conventional online payment business.

Another early crypto adopter was Marc Andreessen, the Netscape co-founder whose work creating the first major web browser played a key role in the internet revolution. Unlike Mr. Thiel, Mr. Andreessen’s political profile was standard Silicon Valley, with a history of donations to Democratic campaigns and vocal advocacy for Barack Obama in 2008 and Hillary Clinton in 2016. In early 2014, soon after his firm began investing in crypto, Mr. Andreessen promoted a high-minded vision of crypto to make the world a better place, in which its tools would bring the “roughly 175” countries without fully modern banking and payment systems into the global financial infrastructure.

Whether crypto was intended to replace the bank and its regulator down the street or to build new banking systems thousands of miles away, the goal was the same. Mr. Thiel and Mr. Andreessen had made big bets on creating their own financial system, one that could replace the existing one and earn them enormous returns. Investment in a new technology by a couple of big Silicon Valley names quickly attracted many others who then funded numerous new crypto start-ups.

Both men focused on the legitimate prospects for cryptocurrency, rather than its deep links to the criminal economy. In 2013, the Drug Enforcement Administration’s analysis estimated that up to 90 percent of Bitcoin transactions that year were primarily used to facilitate illicit activity, including drug sales, blackmail, ransomware and illegal pornography. Many traditional financial leaders were dismissive, as was Donald Trump, who noted during his first presidency that crypto was “highly volatile” and “based on thin air.”

Then came Covid, which led the Federal Reserve to sharply cut interest rates. Venture capitalists took that effectively free money and poured it into the hot new thing. And the more capital that went to funding crypto start-ups, the more that followed — a classic case of “fear of missing out” that can transform a few high-risk investments into a frenzy. The result was a vicious cycle of cash, hype and increasingly unrealistic valuations. A single Bitcoin went from being effectively worthless in 2010 to briefly reaching $69,000 in November of 2021.

The valuations ballooned, as did the promises about crypto.

Morgan Stanley’s then-chief global strategist suggested in 2020 that crypto could replace the U.S. dollar as the global reserve currency. Bitcoin was commonly promoted as a form of “digital gold,” a safe harbor from future financial crises. The podcaster Joe Rogan expressed his fear of storing money with traditional banks and his belief that Bitcoin would be the future universal currency.

In 2021, $33 billion in venture capital was plowed into crypto start-ups, or more than in all previous years combined. Crypto.com paid $700 million to rename Staples Center in Los Angeles and cut an ad with Matt Damon that compared crypto investors to explorers and astronauts.

Criminality continued apace, but millions of Americans also found another use for crypto. “They want to gamble,” says Molly White, an industry researcher and critic, with users rapidly trading various cryptocurrencies to try to gain from their fluctuating values. The pandemic, which spurred an explosion in online speculation of all sorts, rendered currencies so volatile that they couldn’t fulfill Mr. Andreessen’s goal of serving as the financial backbone of developing nations. There was also essentially nobody to hold anyone accountable for falsifying results, for Ponzi schemes, for money laundering or for “rug pulls” — hyping a new crypto to naïve investors, only to disappear with the cash once enough people had bought in.

By the end of 2022, FTX, an industry leader, was bankrupt and its founder and chief executive, Sam Bankman-Fried, arrested, with a conviction and prison sentence coming later. Changpeng Zhao, then the chief executive of the rival Binance, was also sent to prison. His firm was fined $4 billion for profiting from countless scams and crimes — helping ransomware hackers and child abuse sites handle their payments, for example — and enabling financial transactions and money laundering for sanctioned entities like the Islamic State, Al Qaeda and North Korea.

The Biden administration’s efforts to rein in the sector were underway. But they were characteristic of the downsides of the Biden era: inconsistent, confusing and cautious. “Pause letters” called on firms to hold off on projects that did not seem to violate any rules, and executives testified about businesses bogged down by rapidly changing federal regulatory demands. Some crypto firms and their founders found themselves cut off from banking services — which is usually an emergency measure for dangerously risky or potentially criminal clients — without clear explanations or recourse.

The result of all this was numerous bankruptcies of crypto companies and waves of layoffs. Bitcoin’s value plummeted. While the wild volatility, speculative fever, criminal activity and collapse of major exchanges could be reasonably understood as contributing to the industry’s doldrums, crypto’s most committed investors almost exclusively blamed Mr. Biden for their problems. Mr. Andreessen — whose firm currently has about $7.6 billion invested in crypto, or roughly 10 percent of its total capital under management — became convinced that the Biden administration was trying to kill crypto entirely.

Wealthy crypto investors turned to the other guy. Crypto offered Mr. Trump not just the promise of generous political donations at a time when fund-raising for his 2024 presidential campaign was struggling, but it could also potentially deliver a demographic of young male crypto fans. Mr. Trump changed his tune.

Mr. Trump chose Senator JD Vance of Ohio — Mr. Thiel’s longtime protégé — as his running mate and headlined the Bitcoin conference in Nashville two weeks later. “The rules,” Mr. Trump announced, “will be written by people who love your industry.” Mr. Andreessen, who supported Democratic candidates in prior election cycles, backed Mr. Trump’s campaign. In all, the crypto industry would become the dominant corporate donor in 2024, putting in over $130 million; a vast majority of all industry donations to the presidential race were to the Trump-Vance ticket.

Along with money, Mr. Trump’s commitment to crypto got him a new voting bloc whose interests were straightforward. Some 50 million people owned crypto in 2024, according to one research firm, and Mr. Trump had a 12-point lead among that group in the months before the election, according to Fairleigh Dickinson University polling — a lead that was not connected with Republican Party membership.

Mr. Trump won. Almost immediately after taking office, he ushered crypto’s biggest backers into the highest echelons of power. David Sacks, a close associate of Mr. Thiel, was appointed “A.I. and crypto czar,” tasked with designing the new regulatory framework for the industry. Associates of Mr. Thiel and Mr. Andreessen are now peppered throughout the administration.

The administration then set about destroying Biden-era efforts to control crypto. Many regulations, investigations and enforcement cases against the industry have been rolled back or dropped. The Consumer Financial Protection Bureau, which had sought oversight of crypto payments to address scam and fraud complaints, was ordered to halt activities. The Securities and Exchange Commission’s Crypto Assets and Cyber unit was rebranded into a smaller and more industry-friendly team.

Mr. Trump pardoned crypto executives and even a corporation — a first. When he made good on a campaign promise and pardoned Mr. Ulbricht, the black market platform chief, the moment was hailed by the Libertarian Party as “an incredible moment in Libertarian history.”

With regulators defanged and oversight gone, Mr. Trump and a handful of tech backers have been able to seize power and merge their interests with the country’s resources as they see fit.

Over the past nine months, Mr. Trump has turned crypto into an efficient and powerful cash-in machine to grow the family fortune. Remember Mr. Sun, the gala attendee? In addition to the roughly $15 million he spent on $TRUMP, which secured that gala ticket, he has spent at least $75 million on tokens and investments tied to World Liberty Financial, a crypto-finance company mostly owned by the Trump family. The Securities and Exchange Commission’s suit against Mr. Sun has been dropped, and the S.E.C. ceased its investigation into a set of businesses connected with him. And on Thursday, Mr. Trump pardoned Mr. Zhao, the ex-Binance chief. He and Binance have, like Mr. Sun, been highly supportive of World Liberty. If the Trumps are willing to make deals, there is little to stop crypto’s biggest backers from getting anything they want.

Flush with money from the now-powerful crypto lobby, Congress and the administration have already passed one law allowing private companies to issue their own crypto and are considering another that would forever bar the government from issuing digital currency itself, ensuring there would be no free government alternative to the for-profit platforms and the tokens Silicon Valley controls. The result could well be a permanent private replacement of the existing financial system — the ideal outcome for a crypto venture investor. If price is any indicator, confidence in crypto is near an all-time high: a single Bitcoin is now worth nearly $110,000.

President Trump has always approached politics as a branch of business, a way to capture wealth, status and power. But it took someone with his instincts to fulfill the darkest potential of the libertarian project. Mr. Trump seems to have understood something that escaped generations of libertarian politicians and philosophers: Rather than dissolving the power of the state totally, he could do so selectively, to put himself and his allies above the law, while using the full force of the state to punish his adversaries; to promote crypto, while also insisting he be in charge of the Fed; to pardon allies, while having his enemies charged.

For Silicon Valley’s crypto backers, there never was a paradox. “I no longer believe that freedom and democracy are compatible,” Mr. Thiel wrote in 2009. He argues that individual freedom can best exist in a society controlled by an elite of innovator-entrepreneur monopolists, whose command of money seemingly gives them command of everything else.

Palantir, a data-mining company that Mr. Thiel co-founded, is thriving amid a flush of government contracts — contracts for a system that helps conduct mass surveillance on U.S. citizens, including facilitating ICE’s raids and roundups. During Mr. Trump’s second term, Palantir has thus far received over $113 million in federal funding and landed a $1.3 billion contract from the Department of Defense.

And Mr. Andreessen may have once spoken eloquently about the democratizing and empowering promise of the internet. But it was a full year before the 2024 election when he, too, publicly embraced authoritarianism, advocating in his “Techno-Optimist Manifesto” a society dominated by the “techno-capital machine.” A year later, in an interview conducted a month after Mr. Trump’s election, Mr. Andreessen referenced the author of the “iron law of oligarchy,” which argues that a small minority always winds up governing society, and declared that “democracy is never actually a thing.”

Mr. Trump and his Silicon Valley backers may have taken different journeys to get to their embrace of crypto, but they have ended up in the same place: The government, and the population, exists to serve the interests of their businesses, their enrichment, and their aggrandizement. So the trick of libertarianism wasn’t on them. It was on us.

For decades, libertarians tried to sell us on wild notions like ending the public school system, abolishing the police, ripping up all environmental protection, canceling the Federal Reserve. None of those notions succeeded, perhaps because they attacked real-world institutions that we understand. It took an obscure technology, fueled by the Silicon Valley hype machine, mountains of dirty money and a massive gambling boom, to persuade millions of voters to embrace an extreme vision of individual freedom and decentralized money — and somehow overlook the authoritarianism and criminality that accompanied it all along.

Finn Brunton is a professor of science and technology studies at the University of California-Davis and the author of “Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency.”

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