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THE CRYPTO STATE  
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Ramaa Vasudevan, Daniel Finn
June 13, 2025
Jacobin [[link removed]]

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_ The Trump White House has helped install the ticking time bomb that
is cryptocurrency directly into our economy. When it blows up, the
damage will be catastrophic. _

, Illustration by Choi Haeryung

 

There can be few better examples of a purely speculative asset in
today’s capitalist economy than cryptocurrency. That hasn’t
stopped the crypto market from surging to an all-time high, even after
its crisis of 2022, when roughly $2 trillion of crypto assets were
wiped out. Donald Trump’s administration is now determined to
promote crypto with all the tools at its disposal.

Having spent vast sums on lobbying and campaign donations, the
cryptocurrency industry, for all its libertarian pretensions, is now
inextricably linked to the political class in Washington, DC. Ramaa
Vasudevan is a Catalyst editorial board member and the author
of Things Fall Apart: From the Crash of 2008 to the Great Slump. She
told us about the mainstreaming of crypto and the risks that are
building up across the whole financial system as a result.

Daniel Finn

There can be few better examples of a purely speculative asset in
today’s capitalist economy than cryptocurrency. That hasn’t
stopped the crypto market from surging to an all-time high, even after
its crisis of 2022, when roughly $2 trillion of crypto assets were
wiped out. Donald Trump’s administration is now determined to
promote crypto with all the tools at its disposal.

Last year appeared to be a very significant one for the development of
cryptocurrency, with the value of Bitcoin surpassing $100,000 for the
first time, among other landmarks. Before we talk about specifically
political developments in Washington over the last year, what were
some of the key economic developments for crypto in 2024?

 

Ramaa Vasudevan

Yes, 2024 was quite a milestone year for crypto. In the early part of
the year, the value of Bitcoin surged from around $40,000 in January
to surpass $60,000 in March. This surge was noteworthy because Bitcoin
had earlier plummeted to $16,000 after the Sam Bankman-Fried FTX
scandal in November 2022.

Under the stewardship of the so-called crypto nemesis, Gary Gensler,
the Securities and Exchange Commission (SEC) had launched initiatives
tightening regulations around crypto. This included a slew of lawsuits
against big-name companies like Coinbase and Kraken, the software firm
Consensus, and a payments company called Ripple, which were accused of
selling unregistered securities.

However, the SEC also gave its seal of approval to the listing and
trading of a number of Bitcoin exchange-traded funds (ETFs) run by
banks and asset management funds in January 2024, later extended to
Ethereum funds. This was a big factor driving that early surge. These
ETFs are a basket of assets that track Bitcoin and Ethereum prices and
can be bought and sold like shares on an exchange.

While Bitcoin ETFs were already trading in Bitcoin futures, regulatory
approval expanded the terrain, so it was a watershed moment in
mainstreaming crypto that opened the floodgates. There was an influx
of new investors and a growing encroachment of Wall Street into crypto
trades. The ETFs included big players like BlackRock, which launched
its crypto ETF, raking in billions.

Since this trading began in January 2024, these ETFs have seen about
$36 billion worth of inflows, and the BlackRock Bitcoin fund
ballooned to $60 billion. There was euphoria, and investors dismissed
all the scandals and turmoil that had roiled the crypto sphere as they
embraced this new frontier of profitmaking. One sign of this growing
momentum was the heating up of battles over regulation. There was a
big surge in industrial lobbying to steer congressional legislative
efforts so as to empower and legitimize crypto.

The breaking of the $100,000 mark for Bitcoin in December signals the
changing terrain under the new US presidential administration, which
has now embraced crypto with much greater gusto. It has nominated
crypto enthusiasts for key administrative posts with the slogan of
making the United States the cryptocurrency capital of the world.
There is greater support and regulatory latitude, which has expanded
the possibilities for creating and promoting crypto products, drawing
in more retail and institutional investors who are constantly looking
for new frontiers, especially at a time when things in the real
economy have not been looking so good.

Daniel Finn

On the eve of last year’s election cycle, what was the approximate
size of the crypto sector in the United States, and who were some of
its key players?

Ramaa Vasudevan

The market capitalization of crypto was $1.7 trillion at the end of
2023. By March 2024, when this regulatory change happened, it had
risen to $2.7 trillion. It peaked at $3.5 trillion in December, when
the prospect of a new regime was there.

Right now, it’s about $2.8 trillion, and Bitcoin dominates with
about $1.8 trillion. Approximately 60 percent of the crypto market is
accounted for by Bitcoin. By way of comparison, the combined market
capitalization of the four largest US banks — JPMorgan Chase, Bank
of America, Wells Fargo, and Citigroup — reached about
$1.5 trillion at the beginning of 2025.

Despite the claims and promises of decentralization, the actual
functioning of the crypto sphere is dependent on large, centralized
exchanges where you buy and sell crypto assets. This includes the
likes of Coinbase, Kraken, and Binance, as well as centralized lending
platforms such as Block (formerly Square) and centralized investment
vehicles like Grayscale and Galaxy. You also have big players in
Bitcoin mining like Riot and Marathon Digital, while asset management
funds such as BlackRock and Fidelity play a major role in the ETF
sector.

Even before the 2024 elections, there was a lot of money being spent
by the crypto lobby in terms of steering legislation. In 2022, there
was lobbying around the infrastructure bill. They spent $8.9 million
to defeat a proposal that was intended to crack down on tax avoidance
by making it mandatory for crypto platforms to report all transactions
and capital gains to the Internal Revenue Service.

OpenSecrets, a nonprofit group that tracks the role of money in
politics, recorded that the crypto lobby increased its spending from
$2.5 million in 2020 to $22 million by the 2022 election cycle. At
that time, FTX, Bankman-Fried’s company, was one of the biggest
donors. In 2024, crypto’s role was even bigger, and you could think
of it as a coming-of-age moment for the crypto lobby. It effectively
rebuilt its political influence after the FTX fiasco.

This last election was seen as a critical one for the industry. It had
been pushing hard for a regulatory overhaul that would legitimize
crypto with light-touch government oversight. There are three big
super PACs from the crypto sector: Fairshake, Defend American Jobs,
and Protect Progress. They spent about $133 million to boost the
campaigns of crypto-friendly congressional candidates in the 2024
cycle.

According to Public Citizen, another nonprofit group, about 44 percent
of all corporate money that was contributed in the 2024 cycle came
from crypto backers. Before the elections, a spokesperson for
Fairshake, Josh Vlasto, boasted that they would have the necessary
resources to “affect races and the makeup of institutions at every
level” as part of their effort “to build a sustainable, bipartisan
crypto and blockchain coalition.”

In one race, the crypto lobby devoted $40 million to defeating
Sherrod Brown, the former chair of the Senate banking committee and a
strong opponent of crypto-friendly legislation, helping to replace him
with Republican Bernie Moreno, a blockchain entrepreneur. The lobby
also helped defeat Jon Tester, a long-serving Montana Democrat and
another crypto skeptic in the Senate.

Crypto has a presence across party lines. New York senator Kirsten
Gillibrand is one Democratic politician who has received its blessing
and is now playing a very important role in cosponsoring the so-called
GENIUS Act, which is designed to regulate the issuing of stablecoins,
a type of cryptocurrency where the value of the digital asset is
pegged to a reference asset like the dollar or a precious metal. For
all its libertarian facade, crypto finance is deeply embedded in
Washington politics.

Daniel Finn

Could you tell us in more detail about the policy changes that have
been made so far by the Trump administration in relation to crypto,
especially when it comes to oversight agencies like the SEC?

 

Ramaa Vasudevan

In terms of its administrative setup, Trump’s SEC chair, Paul
Atkins, has been on the advisory board of a blockchain company,
Securitize, and the crypto trade group Digital Chamber. Commerce
secretary Howard Lutnick headed the Wall Street firm Cantor
Fitzgerald, which has deep ties to Tether, the stablecoin giant.
Treasury secretary Scott Bessent is a vocal supporter of crypto.

One of the Trump administration’s first acts was an executive order
establishing a working group on digital asset markets. Soon after, the
SEC dropped its investigations into OpenSea, a non-fungible token
(NFT) marketplace, and Robinhood, the infamous electronic trading
platform. It also dismissed all claims against Coinbase. All of these
actions had been opened under the former SEC chair, Gensler. In
addition, the SEC announced that meme coins, like the recently
launched $Trump, would no longer be considered securities and would
therefore be exempt from SEC oversight.

Trump has rescinded a rule put in place under the previous
administration called SAB 121. This was a legally nonbinding
accounting guidance in light of the risk associated with
cryptocurrency assets. It required institutions to treat digital
tokens held in their custody on behalf of clients and customers as
liabilities that had to be recorded on their balance sheets, as a way
of making sure the risks were not hidden off the balance sheet.

Financial actors saw this rule, which was just a guidance and not a
legal stricture, as an excessive operational and regulatory burden
that made it costly for conventional banks to offer custody services
for Bitcoin and crypto. By repealing it, Trump has opened a path for
those banks to woo crypto clients and develop new digital assets.

Trump has also revoked a measure that was embedded in Joe Biden’s
infrastructure bill, requiring decentralized crypto operators to
disclose all transactions and proceeds — another bonanza. Right
now, we have the proposed stablecoin act, GENIUS. This seeks to
institute a framework enabling the growth of dollar-backed stablecoins
with relatively loose requirements and oversight.

The idea is that states would regulate stablecoin issuers smaller than
$10 billion, while issuers above that threshold would be federally
regulated. Under this model, monitoring will of course be light-touch,
with clear limitations on supervision, examination, and enforcement.
For instance, all of the regulatory requirements for conventional
banks — capital cash buffers, or a sensible bankruptcy
framework — would be dispensed with. The proposed legislation also
has a loophole for offshore firms like Tether.

More important is that it grants nonfinancial companies the ability to
issue stablecoins. This is a frontier that Big Tech firms like X and
Meta have been actively seeking to exploit. Senator Elizabeth Warren
has said, in reference to this legislation, that “Republicans are
setting the stage for the richest man in the world to issue his own
currency that competes with the US dollar.” On a side note, World
Liberty Financial, a cryptocurrency group backed by President Trump
and his sons, has just announced the launch of USD1, its own
stablecoin.

Stablecoins are seen as the more stable portion of crypto’s Wild
West, but this area is being opened up in dangerous ways. We can also
expect a market structure bill based on the earlier Financial
Innovation and Technology for the 21st Century Act, which had stalled
under the previous administration. This is basically going to take
regulatory enforcement away from the SEC and place it in the hands of
the Commodity Futures Trading Commission, which is seen as more
permissive. In addition, ways will be found to allow crypto funds to
access banking services directly.

What all these policies boil down to is a relaxation of restrictions
on the issuance, use, and trading of crypto assets, while at the same
time easing constraints on banks and fund managers in dealing with
these assets. Crypto is being brought out from the shadows to the
center stage, and with minimal regulatory oversight. Pension funds
like the State of Michigan Retirement System and the State of
Wisconsin Investment Board are already holding Bitcoin funds.

Daniel Finn

The most spectacular example of crypto’s mainstreaming seems to be
the move by Trump to establish a national crypto reserve for the
United States. How would that work in practice, and what impact is it
likely to have?

Ramaa Vasudevan

This is another major plank of the crypto agenda. The establishment of
the Strategic Bitcoin Reserve would give Bitcoin an official
imprimatur and extend the public safety net by putting a floor under
Bitcoin prices. The fund will be, in a sense, a base for conducting
quantitative easing, but this time for Bitcoin. The artificial
intelligence and crypto czar David Sacks has called this reserve a
“digital Fort Knox” for cryptocurrency, likening it to digital
gold.

The problem with this scheme is that, in effect, the public exchequer
would take on the risks associated with Bitcoin price volatility. The
history of Bitcoin has seen spectacular movements. You need a fund
with a large balance sheet that is going to be willing to buy and sell
in order to contain this volatility.

The concern that taxpayers will be left holding the bill has been
dismissed. Trump’s team has promoted the idea that the fund is going
to be budget neutral, so any new outlay will be offset by reduced
spending elsewhere. That in itself is a scary prospect, because if
taxes aren’t going to be raised, where is spending going to be cut?

The other way of funding it is creating money out of thin air. One
proposal is that the Bitcoin owned by the Department of the Treasury,
most of which has been forfeited as part of criminal or civil asset
proceedings, is going to be handed over. Another is an accounting
gimmick, which the economist Nathan Tankus has nicely explained,
whereby the Federal Reserve will relinquish its existing gold
certificates — not actual gold, but certificates that are claims
on gold — and buy them back at a new, fair, market-value price. It
will then pass on to the Treasury and the Bitcoin reserve fund the
difference between the old price and the new one.

Even if we ignore the fact that the crypto sphere is rife with fraud
and graft, we have to recognize that crypto is a segment of finance
that is completely detached from funding production and real
investment. Finance is a complicated and contradictory beast. It is
essential plumbing for the capitalist economic system, but it is also
the basis of speculation.

Crypto is a sphere that is _completely_ about speculation. It is
finance for its own sake, and this reserve is extending a safety net
to this sphere while giving it free rein to pursue speculation. This
is a setup for disaster.

“Crypto is a sphere that is completely about speculation. It is
finance for its own sake.”

Daniel Finn

How great would you say is the contagion threat from crypto to the
economy as a whole in the United States or the wider world? Have any
useful lessons been learned from the crisis of 2022?

 

Ramaa Vasudevan

The short answer is that not enough has been learned. The crash of
2008 did not lead to any reining in of securitization. That was at the
heart of the shadow banking system that unraveled when the subprime
mortgage market collapsed. In a similar way, the ructions in the
crypto sphere have not diminished its attraction or even led to the
clipping of its wings.

If anything, the tendency for financial fragility has been exacerbated
with the mainstreaming of crypto and the permissive attitude of
regulators, despite the highly speculative nature of cryptocurrency
and the perils of exposing unsophisticated or retail investors to this
volatility. Stablecoins, which facilitate transfers across crypto
platforms and are the critical link with finance, pose special
systemic financial risks. If there’s a run on a stablecoin, it could
set off a chain of events that would destabilize various parts of the
traditional financial system.

In the turmoil of 2022, we saw how the effects carried over from one
crypto fund to another. Now it can also go from crypto to conventional
banking. A Bank for International Settlements study has found that
when it comes to stablecoins, it doesn’t matter whether they are
backed up by the dollar or some other fiat currency, commodities, or
other crypto assets. They may be less volatile than other crypto
assets, but not a single one has been able to maintain parity with its
peg at all times.

That is the key thing about a stablecoin. It has to maintain parity
with a peg, yet not one of them has been able to. When this happens,
the impact will be a run on the stablecoin. Depositors will pull out
in a way that is similar to a conventional bank run, magnified by
social media effects, as we saw with Silicon Valley Bank in March
2023.

Furthermore, unlike conventional banks, stablecoins have not been
subject to regulatory oversight or scrutiny to ensure they have enough
credible reserves to maintain their peg. When liquidity evaporates and
the stablecoins collapse, this will not only rupture the workings of
the crypto finance sector, where they are a critical link. There will
also be potential spillovers into the conventional financial sector.

If there is a fire sale of conventional assets that are backing the
stablecoins in order to meet the deluge of redemptions, there will be
a panic that will spread to these markets. If the coins are backed by
US Treasuries, the spillovers would affect the US Treasury market,
which is the anchor of the US-led global financial system. This would
necessitate the deployment of the financial heft of the US Federal
Reserve to contain the unraveling. As well as a Bitcoin reserve fund,
you’ll need to have a stablecoin reserve fund.

As crypto finance grows and permeates conventional finance, the
aftershocks of crypto convulsions will not only be more
widespread — they will also have more profound repercussions. Just
as the global financial crisis forced the Federal Reserve to bring all
of its financial power into play to rescue shadow banking, when this
crisis strikes again because of crypto markets, the Fed will be
compelled to extend its backstop to these stablecoins in order to
contain systemic crashes and prevent the implosion of the financial
system, both crypto and conventional.

The bigger the speculative bets, the larger the rescue that is
necessary. This enables even greater gambles to be made, and things
become more intractable. Contagion is going to spread, and the
so-called decentralization of finance through crypto is going to mean
that more and more funds and more and more people are affected. These
crypto gambles would then have to be subsidized by the state, which is
a truly scary prospect.

Daniel Finn

One of the world leaders that Trump and, especially, Elon Musk have
pointed to as a role model for what they’re attempting is Javier
Milei in Argentina, who’s been embroiled in a scandal involving meme
coins. Could you tell us something about the nature of that scandal
and what it tells us about crypto?

Ramaa Vasudevan

Javier Milei set this off with a post on X to his nearly four million
followers, expressing his support for a new meme coin, $Libra, which
he claimed would promote economic growth and fund small businesses in
Argentina. It was a typical pipe dream of being able to create funds
out of nowhere and overhaul the Argentine economy. But here it was
actually about pumping money into a few people’s pockets.

$Libra spiked to a level of about $5 soon after Milei’s tweet. Hours
later, it collapsed from $5 to 50 cents, because approximately
$100 million of the investments were quickly withdrawn. The president
quickly deleted his post, and critics accused him of being complicit
in a classic rug-pull scam. That’s when an influential person touts
a financial asset, drumming up investors; money flows in, the price
inflates; and then, while the price is high, the person who started it
just absconds or sells.

You had the president of a country seen as being complicit in this
rug-pull exercise. There was an outcry and a corruption probe,
including a push for impeachment. But Milei doubled down, saying he
had only shared the tweet and not promoted it. He also said, “If you
go to the casino, you lose money. What’s the complaint?” There was
no recognition that the head of state had actively promoted the idea
of going to the casino.

In the meantime, the Argentine stock market and the peso also fell.
Milei has developed a reputation for tackling Argentina’s debt and
inflation crisis with a particularly perverse and autocratic brand of
austerity. With the fall in the stock market and the value of the
peso, Milei returned to the International Monetary Fund for yet
another loan while bypassing the legislature in order to boost his
economic agenda and electoral prospects.

This is a depressing story of grift, graft, and greed. But it’s also
a sign of what to expect from the melding of crypto and political
power that is being celebrated right now by the regime in the United
States.

Daniel Finn

Where do you think crypto is going next in the United States and the
rest of the world, and what are its implications likely to be for the
global economy?

 

Ramaa Vasudevan

The most significant factor is the mainstreaming of crypto, with the
interpenetration of conventional and crypto finance and the extension
of the state’s guarantee to the crypto sector. Apart from this, the
basic elements of crypto’s plumbing are likely to be embedded and
adopted in the conventional financial system, including things like
blockchain, smart code, and tokenization.

Bitcoin was launched on a libertarian promise of depoliticizing money
by privatizing it and removing it from the control of the state and
big banks alike. Yet the financial revolution it has engendered has
consolidated the power of cryptocurrency and embedded it within the
machinery of the state.

“The financial revolution Bitcoin engendered has consolidated the
power of cryptocurrency and embedded it within the machinery of the
state.”

There is another very significant aspect of the recent developments.
Big Tech is embracing finance and cryptocurrency as a way of
leveraging its digital infrastructural capacity. BlackRock has
announced plans to launch an artificial intelligence investment fund
in partnership with Microsoft and MGX, an Abu Dhabi–based investment
company, to build infrastructure (including data centers) servicing
AI. Google has signed a ten-year cloud computing agreement with
Chicago Mercantile Exchange, and Amazon Web Services has struck a
partnership with New York’s Nasdaq.

As part of this agenda, a Silicon Valley–Washington nexus is being
grafted onto the existing Wall Street–Washington nexus that had
implicated the state and the Fed in bailing out Wall Street from all
the consequences of its risk-taking over and over again. We are seeing
the extension of the doom loop that ties the state to finance and now
to Big Tech spreading to crypto and financial technology in order to
harness the immense possibilities of monetizing and weaponizing the
data and digital footprints of everyday life in the pursuit of private
profit.

The way this nexus has developed in the United States is quite
distinct from what we see in China. There the big Chinese tech
conglomerates entered the field of financial services in a context
where the strong arm of the state retains the upper hand in the
balance of power and tries to enforce restrictions on credit. The
peculiar form this nexus is taking in the United States is a
development that has potential implications on the global front.

The Biden administration had begun to explore a central bank digital
currency to preserve and expand dollar hegemony and preempt China’s
first-mover advantage in the sphere. It wanted to reinforce US
leadership in the global financial system at the technological
frontier, so as to assert control over the global rules and standards
for digital finance and crypto technology.

The proposed GENIUS Act suggests that the present regime is seeking to
undergird global dominance by using stablecoins backed by US Treasury
bills rather than a central bank–issued digital currency as a tool
of monetary and geopolitical policy. This is how it intends to
preserve the dollar’s role as a world reserve currency while
limiting foreign purchases of US Treasury bills in order to prevent
too much appreciation of the dollar, which is a concern of the Trump
administration.

It wants to do this amid the growing uncertainties and fissures of the
global order that we are seeing. Its chosen path is giving a boost to
less regulated private instruments, driven by profit motives, as a
linchpin of the international financial system. The fragility of this
setup cannot be overemphasized. At the same time, there is a growing
sense of disquiet and restiveness around the world about the
dollar’s global rule and the possibilities of its further
weaponization.

This has also led to an exploration of central bank digital currencies
and alternative crypto-technology payment channels by the rest of the
world. This is going to be a space where the contours of the evolving
global order will be shaped. The implications for the emergent Silicon
Valley–Wall Street–Washington nexus remain to seen.

_RAMAA VASUDEVAN teaches economics at Colorado State University. She
is the author of Things Fall Apart: From the Crash of 2008 to the
Great Slump._

_DANIEL FINN is the features editor at Jacobin. He is the author
of One Man’s Terrorist: A Political History of the IRA._

_JACOBIN is a leading voice of the American left, offering socialist
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