Will Trump's issuance of currency make cryptocurrencies a reality for casinos or expand the legal boundaries of Web3?

Less than three days before taking office as US President, Trump issued a coin.

The TrumpX official account stated that the token was issued by Trump himself, with an issue price of $0.18. In just two days, the highest price reached $82. The overall market value reached a peak of $82 billion, and the circulating market value reached $16.4 billion.

At its peak, the token’s market value exceeded the combined market value of Trump’s two listed companies, Trump Media & Technology Group and Digital World Acquisition Corp.

Not only Trump himself issued the coin, but also his wife issued related Meme coins after seeing the huge benefits behind Trump Coin. The project WLF launched by his family also raised funds slowly for three months. Due to the popularity of Trump Coin, it quickly completed the fundraising on the morning of January 20, selling 20% ​​of its total tokens to raise $300 million. After the fundraising ended, the project opened up the sale of 5% of the total tokens, and the public offering price was three times the original price.

Trump had previously issued NFTs after leaving office as the first president, but the response was mediocre. This time, he chose to issue the currency three days before taking office, which is undoubtedly a good time for him to issue the currency when his political traffic is high and it seems that he can avoid legal risks.

With the right time, right place and right people, the Trump family made a fortune through this round of coin issuance. However, after the brief emotional climax of getting rich from Trump coins, the currency circle experienced a sharp drop. On January 20, Bitcoin fell below 100,000 US dollars.

Hidden concerns have emerged. First of all, is Trump's behavior illegal? Is he at risk of impeachment?

The act of issuing coins to raise money three days before going online seems to have a very bad direct impact on the crypto industry. First of all, for outsiders, the stereotype that crypto = casino is further confirmed.

Secondly, Trump’s extraordinary behavior has increased the uncertainty of the introduction of a series of policies and regulations that he had previously promised would benefit the development of the crypto industry.

A more fatal impact is that the cryptocurrency community used votes and capital to support Trump as president, hoping that he could guide the crypto industry to further develop in compliance. Trump's behavior of issuing Meme coins before taking office also made people in the industry suspicious and lost confidence in him.

However, there are also views that Trump’s extraordinary behavior will broaden the boundaries of US Web3-related laws.

The legal risks of Trump's currency issuance have been basically avoided

By choosing to issue tokens before officially taking office as president, the Trump family is undoubtedly trying to avoid legal risks while converting the political capital of "president" into economic value to the greatest extent possible.

In fact, the Trump family has basically avoided legal risks.

First of all, its currency issuance behavior does not seem to involve official corruption, bribery, etc. Xiao Sa, a senior partner of Beijing Dacheng Law Firm , told Golden Finance that the US president has the legitimate right to obtain "bribes", which is the political donation system of the US president. However, political donations are subject to various conditions. According to the provisions of the US Federal Election Campaign Act, US presidential candidates may not accept donations from foreigners, people with contractual relations with the government, national banks, companies, trade unions, etc. In other words, first, presidential candidates may not accept donations from foreigners. Second, this regulation only regulates "donations". The so-called donations are donations in the form of legal currency such as cash.

If Trump issues virtual currency, it will inevitably cause foreigners to make profits by purchasing virtual currency on a large scale. Moreover, before Trump officially takes office, he is still considered a "presidential candidate", so if he issues his own virtual currency before he officially takes office, there is a great risk of violating the Federal Election Campaign Act. If we follow this logic, then Trump will definitely break the law.

However, Trump will not bear the above-mentioned legal risks because of the Federal Election Commission (FEC)'s determination of the nature of virtual currency. In fact, as early as the beginning of Trump's first term, the Federal Election Commission (FEC) ruled that virtual currency can be regarded as non-cash donations similar to stocks and bonds. Non-cash donations are not subject to the Federal Election Campaign Act's provisions that foreigners are not allowed to make political donations to US presidential candidates. In other words, virtual currency is not cash, and if it is not cash, it is not subject to the cumbersome regulations of the US political donation system.

Liu Honglin, founder of Shanghai Mankiw Law Firm , told Golden Finance that current US law does not prohibit the president from engaging in private business while in office. The tacit understanding established by successive US presidents is generally to entrust the company to relatives for trusteeship and report the company's operating conditions to the state tax department for review. For Trump, his family business will be handed over to his family during his term. During the election, the financial disclosure statement he submitted in accordance with legal requirements showed that his financial interests were reflected in more than 500 companies, and he owned a large number of commercial buildings, hotels, golf courses and other properties and other businesses around the world.

However, in my opinion, even if there are no strict legal restrictions, the business activities of the US president will be closely watched and monitored by political opponents, the media and the public. If the president's business behavior is considered inappropriate or not in the public interest, he may face huge political and public pressure, and may even affect his political reputation and support rate.

At present, the issuance of coins by him and other members of his family has caused a lot of criticism and dissatisfaction in public opinion. For example, the New York Times criticized that the essence of "Trump Coin" is that Trump is "using his presidency for personal gain." Adav Noti, executive director of the non-profit organization "Campaign Legal Center", said that Trump holds 80% of the shares of "Official Trump" through his NFT company CIC Digital, which means that he may obtain huge economic benefits from it. "This is actually using the presidency for profit - creating a financial tool that enables people to transfer funds related to their position to the presidential family. This is unprecedented."

Did Trump and his family violate the relevant provisions of the securities law by issuing coins? By disassembling the various specific sales details of the token sale, we can find that it is mentioned many times in the sales terms that the Trump token is not a security and that users’ purchase of the token is not an investment behavior, but to express their support and participation in the ideals and beliefs embodied by the symbol “$TRUMP” and related artworks.

Although the token wants to explicitly avoid the various legal risks of being listed as a "security" in the sales documents , Xiao Sa believes that in theory, it may still face legal sanctions (although the president has the right to pardon himself, the negative impact of doing so may be greater). In detail, the supervision of virtual currencies in the United States is mainly the responsibility of multiple agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Office of Foreign Assets Control (OFAC) under the Treasury Department. These agencies have set strict rules for the issuance, trading, and use of virtual currencies.

According to the U.S. Securities Act of 1933 and the Securities Exchange Act of 1934, if Trump and his issuance are deemed "securities", then their issuance must be registered with the SEC or meet exemption conditions. If the president issues virtual currency without complying with these regulations, it may constitute an illegal securities issuance.

However, Xiao Sa said that the legal team behind the Trump family should have avoided various possible legal risks before issuing tokens.

Cryptocurrency is not gambling, but the boundaries of the law seem to need gaming to expand

The huge public pressure that Trump's currency issuance behavior faces also makes people wonder what impact his behavior will have on the future development of the crypto industry?

Most directly, Trump's coin issuance is a consumption of his presidential credit. In particular, after the public sale of WLF project ended, it immediately released 5% of the total token issuance for sale. And Trump's wife also issued Meme coins while the market was hot. This further deepened the stereotype of the outside world about the crypto industry: cryptocurrency = gambling. Indeed, hyping Meme tokens is itself a kind of gambling behavior, a typical zero-sum game.

Trump's crazy move makes people worry whether the encryption-related policies and regulations he promised can be successfully issued and implemented.

After the decrees issued by the US President are issued, they will be supervised by relevant departments. If problems are found in the implementation of the decrees or the results are not ideal, the decrees may be adjusted or modified. The US courts have the right to conduct judicial review of the decrees issued by the president. If someone believes that the decrees violate the constitution or laws, they can file a lawsuit in court, and the court will make a ruling based on relevant laws and constitutional principles.

However, in the opinion of lawyer Liu Honglin, Trump's behavior has the connotation of performance art. Trump's style of doing things is "exaggerated", and he always pays attention to "winning with big things". He will not do small things within the existing framework, but will do big things. This is consistent with what Mr. Lu Xun said, "If you want to break a window, then you open your mouth to say that you want to take off the roof."

Liu Honglin speculates that in the future, in the game between the US regulatory authorities and the president on Web3 regulatory policies, Trump should continue to throw more bombs to government officials to deal with, which will be a continuous game and gradually expand the boundaries of industry compliance development and the limits of government regulatory standards. However, this incident will be beneficial to the future regulation and development of web3 in the United States.

The author partially agrees with the view of lawyer Liu Honglin, because the laws of the United States are themselves largely the result of bargaining among all parties. From the legislative process, there is fierce competition among the political parties within the U.S. Congress. The Democratic Party and the Republican Party have been arguing over many policy legislations due to different political philosophies and the demands of interest groups. Members of Congress also represent different interest groups, and there is also a game of checks and balances between the executive and legislative branches. The president's legislative initiatives must be passed by Congress. The president's veto power and the congressional veto-override mechanism prompt both sides to find a compromise point, especially when the president is not in the majority party of Congress, the game is more intense. In addition, there is also a game between the judiciary and the legislative and executive branches. The judicial review of the Supreme Court affects legislative and administrative decisions, and the appointment of judges has also become the focus of competition among all parties. These fully demonstrate that American law is the product of bargaining among all parties.

On the one hand, Trump's bold and "criticized" behavior will indeed expand the boundaries of US law on crypto regulation. Moreover, Trump's Trump coin has really made the crypto industry really popular. In the past two days, major mainstream media and social media have been discussing "Trump" coins, and a large amount of outside funds have also entered the market.

After Bitcoin fell below $100,000 on January 20, it broke a new high this afternoon. According to the OKX exchange market, Bitcoin hit a high of $109,800.

But I still have concerns. This is a project without any technological innovation. Its significance may just be to complete the transfer of wealth. Trump and his family are undoubtedly the biggest beneficiaries of this wealth transfer. The company under his name owns 80% of the token. Is such a project really beneficial to the development of the industry?