Since Donald J. Trump won the 2024 election, cryptocurrency has surged to its highest level ever. David Yaffe-Bellany, a technology reporter for The Times, explains how a small, renegade industry that began as a challenge to the financial system ended up on top of it.Guest: David Yaffe-Bellany, a technology reporter for The New York Times.Background reading: Earlier this month, Bitcoin hit a milestone: $100,000.Eric Trump has promised the “most pro-crypto president” in history.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.
From The New York Times, I'm Sabrina Tavernisi, and this is The Daily. Since the election of Donald Trump, cryptocurrency has surged to its highest level ever.
Speaking of President Trump coming back, wow, did he put the fire under Bitcoin.
Bitcoin, wow, through the roof, another huge record.
Tonight, a new record for Bitcoin surging past $100,000 for the first time.
We have $100,000 in Bitcoin. We have the potential for people feeling as if, wow, we made it.
Today, my colleague David Yaffe-Bellini on how a small renegade industry that began as a challenge to the financial system ended up on top of it. It's Thursday, December 19th. So, David, you and I have been talking for years now about the ups and downs and ups again of this thing that never really seems quite real or solid, and that is crypto. And now crypto has exploded in value.
Is this just another twist in the roller coaster or is it something bigger? Is this a pivotal moment?
So obviously, it's impossible to predict the future, especially where cryptocurrency is concerned. But it's certainly the case that this new surge in the crypto world is different from ones that we've seen in the past. And let me put this into perspective for you for a second. Bitcoin was created about 15, 16 years ago, essentially out of thin air. It was worth nothing.
You know, famously, there was this early experiment to kind of prove how Bitcoin could be used, where a guy went onto an internet forum and said, I'll send 10,000 Bitcoin to somebody in an exchange, send me $40 worth of pizza. And that exchange happened. and somebody was paid 10,000 Bitcoin for two pizzas.
Fast forward to this year, and suddenly that is the most expensive dinner in the history of the world.
How much is it now?
Just one Bitcoin now is worth over $100,000. Ooh, so do the math for me. Actually, wait, what is it? So that's a $1 billion pizza order right there.
Wow.
Yeah. And, you know, this is a 15-year time horizon. I mean, you know, this isn't like centuries and centuries. If you look at all the Bitcoin in circulation, the total value of those Bitcoin is about $2 trillion. And that's more than the combined worth of MasterCard, Walmart, and JPMorgan Chase. So that just gives you a sense of the scale of this.
And, you know, what it essentially shows is that Bitcoin has been one of the most successful financial products of the last 20 years and that this industry is succeeding, at least in terms of the market, in a way that it hasn't even in the past when you've seen headlines about people getting rich from Bitcoin.
Okay, so feels potentially very real. Why has crypto been having this resurgence?
So there are two main drivers behind this, and the first one will be familiar to listeners of the show who've followed our coverage over the years. And it all comes back to this obscure court case that played out about a year ago.
On one side, you had the crypto industry, which wanted to offer a new investment product that would basically just make it easier for people, regular people, to invest in Bitcoin. On the other side, you had the US government, which wanted to stop that from happening. They didn't want the US investing public to have more exposure to the crypto markets.
In that court battle, the crypto industry won, and it was a huge game changer for the industry. It meant that ordinary people had a type of access to crypto investments that they'd never had before. And in some ways, it kind of brought crypto into the mainstream of the US economy. You know, it allowed people to have their retirement accounts invested in crypto.
And it brought a huge amount of new money into the Bitcoin world, sending the price of Bitcoin higher and higher.
Got it. So that's part of the explanation, this kind of opening up of the mainstream economy to this pretty rarefied, kind of weird, formerly on the fringes financial instrument. But I also remember at that point, David, because you and I, of course, did an episode about this. I remember that the federal government and the regulators did not like that so much.
There was kind of a frenzy of concern among the federal government.
Absolutely. Federal regulators in Washington were concerned that people would be exposed to the volatility of the crypto world, that their savings could disappear. There were wider concerns about how crypto companies were behaving financially. whether they were sort of revealing the right type of information to the public about these kind of risky financial assets that they were offering.
And what the Feds wanted to do was kind of protect the wider economy from the craziness and volatility of this fringe boom and bust crypto world. And the person who was at the center of that effort to kind of protect the U.S. economy was a guy named Gary Gensler, the chair of the Securities and Exchange Commission.
The field is going to have a challenge building trust. Right. And it already has a challenge building trust when there's so many fraudsters, scammers, grifters in the field.
And just remind us, David, what was Gensler's kind of thrust here? What was he trying to do?
Look at the leading lights in this field, in the crypto field just two years ago. A number of them are in jail right now. And I'm not just talking about SBF. I mean, a number of others. And there's been tens of billions of dollars of losses and bankruptcies and so forth.
Gensler was essentially trying to kind of partition crypto away from the U.S. economy. And the way that he was doing that was insisting that crypto should be regulated like Wall Street.
It's an innovation. But innovations don't long thrive if they don't also build trust. I mean, the automobile wouldn't have survived if you didn't have traffic lights, if you didn't have stop signs and even cops on the road to make sure there weren't accidents. And so that's part of our role is being cops on the beat.
He said that, you know, crypto companies should have to reveal to their investors the sort of basic details of how these companies operate so that people would know what they were getting into, essentially, what they were putting their money into. And he did that through a campaign of enforcement. He was filing lawsuit after lawsuit after lawsuit against the biggest crypto companies.
And he essentially became the sort of bait noir of the crypto industry. You know, every company was getting these notices saying the SEC is coming after you.
He was basically trying to make sure that crypto, which really is this pretty risky thing, that if it were to go belly up, it would not infect the broader economy.
Absolutely. I you know, the FTX crypto exchange going under that was really bad for crypto investors, but it didn't have a particularly sizable effect on the rest of the economy. People who hadn't chosen to risk their money in the kind of crypto casino were more or less spared any of the harm of that. And Gensler and other U.S.
regulators wanted to ensure that that stays the case in future kind of crypto crises.
So, David, how did the crypto industry respond to that, to all of this that Gensler was doing?
The crypto industry responded with just a torrent of anger. You had basically every crypto executive going on Twitter, saying things like, Gensler is the devil incarnate. You know, you can't really overstate the level of vitriol that was directed toward this regulator. Of course, for regular people, that was easy to ignore. It was just executives kind of sounding off on Twitter.
But behind the scenes, crypto was asserting itself in a much more aggressive and important way. Industry leaders were starting to get organized, organized in a way they'd never been before.
They were putting together a political spending machine, raising money in advance of the 2024 election campaign, where the industry would go on to spend huge amounts to support congressional candidates across the country who support crypto, who think that it's a valuable technology that could actually boost the U.S. economy in the long term.
And this was new for the crypto industry? Yes.
It's not completely new. You know, listeners might remember Sam Bankman Freed. He was that kind of tousled haired chief executive of the FTX crypto exchange who was a big star in business and politics for a while until it turned out that he was stealing billions of dollars from his customers.
And was prosecuted and went to jail for it.
Exactly. And is now serving a 25 year sentence. So he's not on the scene anymore. And, you know, in any case, the political spending that he was doing was sort of haphazard. It wasn't kind of driven by a unified strategy. It was really organized by him rather than by a kind of coalition of companies.
But what we ended up seeing in 2024 was a coalition of crypto companies working together really closely and really strategically to pour a huge, honestly unprecedented amount of money into politics. They created a brand new super PAC called FairShake. which spent a total of about $130 million in the 2024 campaign cycle, supporting more than 50 congressional candidates around the country.
And that amount of spending is one of the most audacious, aggressive spending sprees by any industry in the post-Citizens United era of American politics. It's a huge deal, not just for crypto, but honestly in the history of money in politics in the United States. And at a high level, the objective was to create the most pro-crypto Congress in U.S.
history, to fill seats with people who had advanced crypto policy goals. But obviously, there were particular races that were especially important. And one great example that kind of crystallizes the stakes of this for the crypto industry was the Ohio Senate race, which pitted Sherrod Brown against Bernie Moreno.
The stakes were so high because Sherrod Brown, the incumbent Ohio senator, longtime Democrat, was chair of the Senate Banking Committee, which is a kind of super important committee in the legislative process for financial regulation. And Brown was also, you know, a crypto skeptic.
Last year, I warned that the splashy Super Bowl ads left out key details. They didn't mention the fraud. They didn't mention the scams. They didn't mention the outright theft. The ads didn't point out that you can lose big in crypto's huge price.
So you had this kind of powerful anti-crypto figure in the Senate. And his opponent, Bernie Moreno, is sort of the opposite.
They want to tell us what kind of car to drive. They want to tell us what kind of stoves to have. They want to tell us that we're not allowed to own Bitcoin and they don't even understand what it is. I mean, that's a fundamental assault on our rights.
I mean, a Bitcoin booster who'd actually founded his own crypto company and on the campaign trail, you know, talked relentlessly about how much he loved crypto. The industry spent $40 million on that race, you know, to try to boost Bernie Moreno's candidacy. And Moreno won. Another key race was the Democratic Senate primary in California.
The industry spent a huge amount of money trying to tank the candidacy of one of the Democrats running for that slot, Katie Porter. The reason they went after her is because Porter is a close ally of Elizabeth Warren, the liberal Democratic senator who's also been an outspoken critic of crypto.
So you can see how the industry was kind of both trying to boost people that they liked and also take down vocal critics of the crypto industry. In California, Katie Porter lost, and that sent a really strong message about the power of the crypto industry.
OK, so they dump all of this money into these congressional races, which, as you and I both know, is the oldest way and the most tried and true way of, you know, shaping political outcomes in the United States is putting money into politics.
Absolutely. It's the oldest corporate strategy in American history. But it's still a little surprising coming from the crypto industry because, remember, this industry originated as this kind of renegade libertarian force in American economics. It wanted to be something different, to redefine how business was done in the United States.
But it's evolved significantly over the last 15 years to the point that it's now kind of another big money industry. It's playing at the big boy table with big pharma, big oil, those other kind of classic political spenders.
Okay, so they're at the big boy's table. What else do they do in this strategy to influence politics?
Well, in addition to spending all this money on congressional races, they're targeting the most important and influential political figure in the country, and that's Donald Trump.
And David, tell me the deal with Trump and crypto, because my sense from reading your coverage and our colleagues' coverage is that he likes it, but I don't remember anything in his first term about crypto or his relationship with crypto. So tell me about Trump and crypto.
Yeah, Trump didn't say much about crypto in his first term. And on the rare occasions that he did talk about it, he was uniformly negative. He tweeted about its volatility, about its association with criminal behavior, and he just spoke plainly about how much he didn't like it.
Bitcoin just seems like a scam.
In 2021, he called into Fox Business and suggested that Bitcoin was a scam, that it was designed to undermine the U.S. dollar.
I don't like it because it's another currency competing against the dollar. Essentially, it's a currency competing against the dollar. I want the dollar to be the currency of the world. That's what I've always said.
He just didn't hide that skepticism. He made his preferences clear in all sorts of ways. In fact, toward the end of his first term, the SEC under Trump actually brought one of the very first major enforcement lawsuits against the crypto industry. So that was the kind of Trump first term attitude toward crypto.
But then something happened this year in, you know, early to mid 2024 on the campaign trail.
Hello, Bitcoiners. Thank you very much. Hello. It's good to be with you.
Suddenly, Trump started talking about crypto in a different way. He started saying that he loved it.
And I don't think you've ever seen anything like it. And most people have no idea what the hell it is. You know that, right?
He made a now very famous appearance at the annual Bitcoin conference in Nashville in July, where he said that if the United States doesn't embrace crypto, then China will.
Because if we don't do it, China's going to be doing, others are going to be doing it. Let's do it and do it right.
And he promised to turn the U.S. into the crypto capital of the planet.
And the Bitcoin superpower of the world. And we'll get it done.
And he vowed to get rid of Gary Gensler, the kind of arch-villain of the crypto world.
On day one, I will fire Gary Gensler and appoint a new SEC chairman. I didn't know he was that unpopular.
But his pivot on crypto, and it's really a transformation on crypto, crystallized this fall when Trump announced that he is starting his own crypto business, which he calls World Liberty Financial.
Okay, World Liberty Financial.
What is that? It's still pretty sketchy what World Liberty Financial actually is. But what Trump has said publicly is that it's going to be a crypto platform. It's going to enable people to do things like borrowing and lending with cryptocurrencies. And there's even a new digital currency associated with it called WLFI for World Liberty Financial. And it's available for purchase.
You can think of it as the kind of technology equivalent of the Trump Hotel, the Trump Hotel on the blockchain. You know, it's a new avenue for people to get close to Trump, to kind of show their loyalty to Trump. And it poses as clear a conflict of interest as any in the kind of Trump business portfolio. And why did Trump change?
So Trump himself has given a series of different explanations for it. But the one that he seems to mention most often is that his sons, including Barron, are really interested in crypto and that they're constantly in his ear about this exciting new technology and how important it is for the U.S. to embrace it. So that's the sort of official explanation.
But I think it's clear to anyone who's paying attention to the crypto industry that the sheer amount of money the industry was spending on politics got his attention. And that it also gave crypto executives a level of access to him that they'd never had before and an ability to try to change his mind. Hmm.
You've got crypto executives donating millions of dollars to the Trump campaign, crypto companies inviting Trump to speak at their events, individual executives kind of courting people in Trump's orbit to try to get meetings with him. It becomes this sort of full court press and a kind of industry-wide embrace of the Trump candidacy.
And of course, we know the end of this story, which is that Trump wins the election.
Not only does Trump win, but the candidates that the crypto super PAC supported also overwhelmingly win. The vast majority of them win their races. In total, various crypto groups have proclaimed that hundreds of pro-crypto candidates across the Senate and the House were elected.
So this is really a kind of astonishing political victory for the crypto industry, an industry that was kind of out in the political wilderness before the election. And it's these political victories that are the other main driver of the surge in Bitcoin's valuation that we've seen recently. The pro-crypto candidates won. They owe a debt of gratitude to the industry.
And that sets the crypto industry up in an entirely new way in Washington, giving it just a whole new level of influence.
We'll be right back. Okay, so crypto now has this new level of influence in Washington, as you say. What does that look like exactly?
So there are a couple of key people who are going to have important roles in the Trump administration who are big crypto backers. The first one is a guy named Howard Letnick.
We are going to welcome Bitcoin into the financing family of the global financial markets. And Canada Fitzgerald is going to be your sponsor.
who runs an investment bank called Cantor Fitzgerald. He's run it for many years. And he's a huge Bitcoin booster. And his bank for a long time has had a business relationship with a very important crypto company called Tether.
We finance and arrange vast, vast amounts. And we are going to now build that ecosystem for Bitcoins.
And Lutnick was appointed by Trump as co-chair of the presidential transition team, which is a super important role. He essentially was overseeing the selection of personnel throughout government.
Incredibly powerful role because in government, personnel is policy. So this is a big deal.
Exactly. So that in and of itself was a huge boost for the crypto industry.
But then... Howard Lutnick. I think he's going to be a bulldog for America at the Commerce Department. What's your think, sir?
Lutnik himself was picked by Trump to be Commerce Secretary, a kind of important role in economic regulation in the cabinet. So that was the first kind of big personnel win for the crypto industry. But the part of the new administration that crypto was most fixated on was the SEC, the nation's main financial regulator.
And it's the agency that had been going after crypto companies in this Gensler era, launching all of these lawsuits. And the person that Trump has chosen to lead the SEC is an experienced securities lawyer named Paul Atkins.
What do we know about Paul Atkins? My understanding is he did serve at the SEC before. He's well known in Wall Street. He's well known in Republican political circles.
Paul Atkins is going to run the SEC. He's pro-crypto. He is. Good. I'm glad to hear it because...
Atkins is not some like crazy fringe pick. He's really respected in the legal community, but he's also a crypto backer. He has consulted for crypto companies during his career in the private sector. And crucially, he served on the advisory board of one of the largest crypto trade groups.
And so as you can imagine, it's beginning to look a lot like a crypto Christmas.
There is a huge amount of enthusiasm in the crypto world when he was selected.
It's enthusiasm and it's palpable.
It's the most pro-crypto, pro-Bitcoin administration in Washington history, it's safe to say. I did not buy Bitcoin and I'm freaking out about it.
So those two key personnel selections, Letnick and Atkins, added to the various Trump family members who are outspoken about crypto.
I believe in cryptocurrencies. I believe that cryptocurrencies are the future.
Eric Trump was just at a big Bitcoin conference in Abu Dhabi talking about how much he loves Bitcoin. You know, that's just generated a huge amount of optimism in the crypto world.
Okay, so not only can crypto count on all of these new people coming into Congress, but they actually have these two incredibly important positions in the highest level of government. What is the effect of that likely to be for the industry, David? It feels almost like kind of crypto cabinet, right? Yeah.
Absolutely, a crypto cabinet, a crypto Congress, and a crypto policy wish list that just seems to get longer and longer day by day as the industry grows more confident about getting what it wants. I think the top of that wish list is that these lawsuits that the SEC has been filing against big crypto companies get dropped.
And that's something that the industry is hoping happens very early in the new administration.
And can Atkins just do that? Like say these cases are now canceled?
In theory, yes, he's running the agency. The agency is bringing these suits and he could shut them down. It's unlikely to happen immediately, but I think at the very least, we're likely to see way fewer new suits. And I think some of those big cases that Gensler filed could disappear or get settled very quickly. So that's on the kind of the SEC front.
There's also legislation that the crypto industry wants, and that has the potential to really shape the industry for the long term. Because, you know, we could always have a new SEC chair in four years or eight years who adopts the Gensler approach. But legislation could really kind of cement the industry status in Washington. Right.
And one thing that the crypto world has been pushing for is a bill that would essentially shift...
regulatory control of the industry from the SEC, which is this aggressive enforcement agency, to a separate financial regulator called the CFTC for the Commodity Futures Trading Commission, which is much smaller, much less aggressive, and generally considered by the crypto world to be a kind of better, friendlier regulator.
So in other words, they want to take power away from this quite powerful agency that had been going after them and give it to a much less powerful agency and presumably less resourced.
Yes, exactly. But the crypto wish list actually goes on even further than that. And it includes things that just a year ago would have sounded like the most ridiculous pipe dream for the industry. So one that's getting a lot of attention is that the crypto world wants the U.S. government to create what they call a Bitcoin strategic reserve.
To keep 100% of all the Bitcoin the U.S. government currently holds or acquires into the future.
And this is actually something that Trump talked about on the campaign trail and said he would do.
This will serve in effect as the core of the strategic national Bitcoin stockpile.
And what is that exactly? A national Bitcoin stockpile?
So I'll start with the caveat that nobody's exactly sure what this is. But, you know, from the reporting that I've done and what people have said publicly, it sounds like what the crypto world is talking about is a stockpile of Bitcoin owned by the U.S. government. The same way that the U.S. government has gold sitting in a vault, it would have its own Bitcoin sitting in a digital wallet.
And you can see why this is appealing for people in the crypto industry who are invested in Bitcoin. Because if the U.S. government suddenly starts buying huge amounts of Bitcoin, then the price will go up and those crypto investors will get richer. And the announcement of the creation of the stockpile would send all sorts of positive signals to the market and cause the price to go up further.
So there are clear advantages from a crypto perspective.
But what justification does the crypto industry give for this? Presumably they're not saying, hey, U.S. government, invest in this thing so that my assets can go up. Like, why do they say it's good for the U.S. ?
So that's where the arguments get a lot harder to understand and the logic starts to become a little bit tenuous. But I'll do my best to kind of articulate what the best version of the argument is. And essentially, it's that Bitcoin is a great investment. Look how much it's gone up in the last 15 years. Look how much it could go up in the next 15 years.
And profits from that investment could be used by the U.S. government to chip away at the national debt. You know, we might not have to raise taxes if the government's just sort of coasting along on its Bitcoin investment profits. So those are the sorts of arguments that the crypto industry is making. There's also a kind of geopolitical argument. You know, right now the world runs on the U.S.
dollar. And so when the U.S. wants to kind of push around its geopolitical rivals, it can do that with economic sanctions. But in a hypothetical future world that isn't run on the dollar, that's run on cryptocurrencies, it might help the U.S. to have this huge stockpile of Bitcoin. How exactly would that work? I don't know. But that's the argument.
Right. If the world is not running on the U.S. dollar, the U.S. has a lot bigger problems than cryptocurrency, I suppose. But let's just kind of carry this pipe dream out here. What would be in it for the U.S.? Like, why would the U.S. ever want to do something like this?
You know, in theory, Bitcoin's at about $100,000 today. Let's say it reaches a million 10 years from now. That's a 10x return for the U.S. government. And potentially, those profits could be reinvested in some way, and then the U.S. wouldn't have to keep borrowing huge sums to offer all the services that are expected from the government. And, you know, the U.S.
could do all that and pay down the debt without raising taxes on the rich crypto entrepreneurs who are trying to have vacations in Bermuda or whatever. Yeah.
Okay, so in sum, it's possible that these crypto companies are actually going to get their entire wish list for Christmas. What might that mean for the rest of the U.S. economy?
Well, for a minute, I'll just try to channel what the crypto industry would say to that question, which is that for years, people have complained, you know, this stuff is useless. It doesn't do any of the amazing things that we were promised. And the industry has come back and said, our hands are tied by these regulators. They're essentially trying to create a system where we can't operate legally.
And so we haven't even really had an opportunity to to showcase the amazing potential benefits of cryptocurrency. Well, now the shackles could come off. In theory, there's an opportunity here for the crypto industry to prove that this stuff actually is useful, that it can create economic benefits for Americans beyond just the kind of short-term high of seeing your Bitcoin shoot up in value.
But I guess, David, one man's shackles is another man's safety valve, right? I mean, fundamentally, this is a very risky asset for all of the reasons we've discussed. And it does seem like watching these new government officials come in and understanding how friendly they are to the industry is
For me, it feels a bit like we might be witnessing the architecture of the next financial crisis being built before our eyes.
Yeah, this is a degree of regulatory capture that is really concerning to a lot of people, especially advocates for consumers, people who think that it's important for the government to have a strong hand to stop abuses in the business world. The crypto industry is now being regulated by by people the crypto industry chose. And there's something fundamentally dangerous there.
You know, in the past, we've had this kind of roller coaster experience with crypto. There have been high highs and low lows and big crashes, but it's all happened outside the existing financial system. The victims of previous crypto crashes have often been wealthy people who were kind of gambling on the speculative asset that went up and down and who were prepared for the potential consequences.
But in this dangerous new scenario, and with those shackles off, crypto has an opportunity to make itself a cornerstone of American finance. And a crash in that world, in a post-Trump crypto world, could be so much more damaging to so many more people than it ever has been in the past.
David, thank you.
Thanks for having me.
We'll be right back. Here's what else you should know today. On Wednesday, the Federal Reserve made their third and final rate cut of the year, lowering rates to about 4.4%. Jerome Powell, the Fed chairman, said the cuts mark a new phase in the Fed's plan to engineer a so-called soft landing for the economy.
The Fed also forecast that there would be fewer rate reductions next year than previously expected, as it continues to try to strike a balance between controlling inflation and preventing job loss. And the stopgap spending bill that Republicans and Democrats agreed to to prevent a government shutdown is in jeopardy after President-elect Donald Trump condemned it.
Trump's move comes just days before a Saturday morning deadline to fund the government and underscored the extraordinarily fraught position that Republican leaders will have to manage in the new Congress when they face a president with a penchant for blowing up politically fraught compromises. Today's episode was produced by Mary Wilson, Michael Simon Johnson, Rochelle Bonja, and Will Reed.
It was edited by Liz O'Balin, fact-checked by Susan Lee, contains original music by Marion Lozano and Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for The Daily. I'm Sabrina Tavernisi. See you tomorrow.