(Bloomberg) -- There’s Donald Trump the crypto champion, promising to unshackle an industry hit by a years-long regulatory crackdown. Then there’s Trump the memecoin, which created billions of dollars of instant paper wealth but earned sharp rebukes even from the industry that stands to gain perhaps the most from his presidency.
Financial executives gathered in Davos this week are choosing to focus more on the former than the latter. Their hope is that Trump will push through legislation making it less onerous for their companies to push into cryptoassets, an effort industry giants from JPMorgan Chase & Co. to BlackRock Inc. have already begun.
“I think that the thing with the Trump administration is we’re going to start to see them converge more the Tradfi and the crypto, which is something that we need,” said Franklin Templeton Investments Chief Executive Officer Jenny Johnson in an interview with Bloomberg Television at the World Economic Forum, using slang for “traditional finance.”
Problem is, Trump the memecoin now risks complicating the agenda of Trump the crypto savior.
The token, which quickly surged to a $15 billion market value after it was launched on Friday and has since plunged almost 50%, could galvanize Democratic opposition and bog down efforts to get digital-asset legislation through Congress, TD Cowen analyst Jaret Seiberg said in a note.
“Our view is that anything which complicates the ability of Congress to agree on a bipartisan crypto market structure bill is negative for the crypto sector,” Seiberg wrote.
The price of Bitcoin, the original cryptocurrency, shows just how much is riding on Trump’s second term. It retreated from a record high on Tuesday after support for crypto wasn’t among a slew of executive orders he issued immediately upon taking office, as many had expected.
Go-Slow Approach
For years, the biggest financial companies were reluctant to dive into crypto, opting instead to experiment with using the underlying blockchain technology for a range of applications — often with little to show for it. Executives tended to view the industry as rife with scams and fraud, and regulations made it impractical or impossible for large banks to hold digital assets on their balance sheets.
But the calculus began to change a year ago when the first US exchange-traded funds investing directly in Bitcoin launched and became an instant hit. Since then, they have ballooned to oversee a combined $121 billion, lead by BlackRock’s iShares Bitcoin Trust ETF.
Two parallel developments also helped pave the way. The first was that comprehensive regulations like the European Union’s Markets in Cryptoassets took effect in several jurisdictions, giving financial firms a clearer view on how to engage with crypto.
The second was Trump’s explicit embrace of and promise to deregulate the industry, which poured at least $135 million into pro-crypto politicians’ campaigns.
Pro-Crypto Cabinet Picks
After winning the election, Trump made his intentions clear by picking crypto advocates for key positions, including Cantor Fitzgerald LP CEO Howard Lutnick as commerce secretary. For executives gathered in the Swiss mountain town of Davos this week, the eagerly awaited next step is a well-defined regulatory framework for things like custody of digital assets.
“With crypto, the key issue for banks has been are they able to custody it?,” said Ron O’Hanley, CEO of State Street Corp. “Up until now, they haven’t been able to given the way the accounting rules have been applied. But the extent to which that changes, I mean that’s then something we’d be interested in custodying.”
Trump’s memecoin — a type of digital token that often starts out as an online joke, has little or no intrinsic value, becomes the object of fevered speculation and then crashes — risks becoming a policy distraction.
It was immediately condemned by government watchdogs as a breach of ethical norms and a money grab riddled with potential conflicts of interest, including with foreign governments. And according to TD Cowen’s Seiberg, it sets the stage for political gridlock in Washington.
“Democrats are going to demand details on who bought the coins and what is responsible for the increase in price,” Seiberg wrote. “They will be searching for indications that foreign governments, foreign businesses and domestic companies are using the coin to influence Trump’s decision-making. They also will demand details on how the Trump family is monetizing this investment.”
Republicans are expected to push back, “which could only worsen partisan tensions and complicate getting to a bipartisan crypto market structure deal,” he added.
Some executives in Davos sought to steer clear of the controversy around the Trump coin, instead outlining their own cautious steps into crypto.
ABN Amro Bank NV’s outgoing CEO Robert Swaak said cryptocurrencies are something the Dutch lender should keep a close eye on. Asked in an interview about Trump’s memecoin, he said: When “you expose large groups of clients to to alternative forms of currencies, you need to be confident that it is indeed a measure or a currency that can be used in a safe way. And to me, that means there’s a bit there’s maturity that has to take place.”
Pressed on when he thought the Trump token launch was mature, he equivocated: “I think that’s another variation on the theme that needs to evolve.”
Then he burst out laughing.
