Trump tariffs tank BTC; Tether plots ‘Made in USA’ stablecoin

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United States President Donald Trump has contributed to one of the worst-performing quarters in ‘crypto’ history, and even some of his staunchest crypto defenders are having buyer’s remorse.

• Crypto tumbles, Trump hawks new sneakers
• Tether could launch new U.S. stable
• SEC says stablecoins are somebody else’s problem
• SEC’s Crenshaw finds fault with new stablecoin guidance
• Trump’s BitMEX pardon saved company $100 million

As the stock market tanked last week following Trump’s imposition of steep economic tariffs, crypto bros like Gemini co-founder Tyler Winklevoss pointed to the BTC token’s deviation from this downward spiral as proof that BTC had finally decoupled from its link to other risky assets and was now firmly enshrined as ‘digital gold.’ Treasury Secretary Scott Bessent went as far as to declare BTC to be a secure ‘store of value’ in turbulent times.

That triumphalist narrative lasted only until Sunday, when BTC abruptly tanked from ~$83,000 to below $78,000. The carnage continued early Monday, falling below $75,000—roughly one-third off its $109,000 peak in the euphoric aftermath of Trump’s re-election—before staging a minor rally. When it comes to digital assets, America has indeed gotten tired of all this winning.

Even before Monday’s plunge, BTC finished Q1 down 11.7% from the start of the year. That’s the worst Q1 performance BTC has endured in percentage terms since 2015 when the token fell nearly 24% over the first three months.

Michael Saylor’s Strategy (NASDAQ: MSTR), formerly known as MicroStrategy, filed a Q1 earnings preview with the Securities and Exchange Commission (SEC) on Monday that showed the unrealized losses on its ‘BTC reserve’ totaled $5.9 billion for the quarter. The average purchase price of the 528,185 BTC that Strategy has acquired in recent years is $67,458, meaning any further significant BTC price declines could prompt awkward questions regarding Strategy’s strategy.

And it’s not just BTC taking it on the chin. On February 3, Trump’s son, Eric, tweeted that “it’s a great time to add $ETH.” At the time, Ethereum’s native token had taken a significant tumble to $2,460. As of Monday morning, ETH was trading below $1,560. (Make Ethereum great again?)

Even the memecoin ($TRUMP) that the president issued just days before his inauguration is struggling. $TRUMP came close to slipping below $7 on Monday, a world away from its all-time high of $73.43 on January 19. Its current valuation of just under $8 is a mere 89.3% decline from its peak.

And yet, Trump is accepting pre-orders for yet another limited-run (1,000 pairs) sneaker collection, this one branded with the “most legendary $TRUMP meme COIN $TRUMP in crypto.” For the low, low price of $299, you too can own these ‘Made in China’ kicks before the Trump tariffs on China push the price even higher.

Tether’s Made in USA backup plan

The Trump-induced decline in both crypto and traditional stocks has prompted infighting among some prominent Trump supporters. Billionaire Bill Ackman, who strongly advocated for Trump during the 2024 election campaign, lashed out at Commerce Secretary Howard Lutnick on Sunday for being “indifferent to the stock market and the economy crashing” because the Lutnick-founded Cantor Fitzgerald (NASDAQ: ZCFITX) “is long bonds. [Lutnick] profits when our economy implodes.”

Ackman walked back that accusation early Monday morning, tweeting that it was “unfair of me to lash out” at Lutnick, who Ackman (for the time being) believes is “doing the best he can.” Perhaps, but for whom?

Lutnick is a staunch supporter of Tether, issuer of the market-leading USDT stablecoin, because Cantor Fitzgerald (a) 
allegedly custodies Tether’s allegedly massive haul of U.S. Treasury bills, and (b) holds a ‘convertible bond’ with Tether. Moreover, the Wall Street Journal (WSJ) reported last November that Lutnick had allegedly promised Tether’s founder that he’d work to ensure no legislation emerged from Congress that might be prejudicial to Tether’s bottom line.

Stablecoin legislation has made unprecedented progress in Congress during Trump’s second term, with both Senate and 
House committees voting to send their respective bills to their respective floors for a vote.

The House bill (STABLE) offers Tether a window of up to two years in which it would be permitted to carry on its U.S. operations on ‘secondary markets’ such as digital asset exchanges. After that, Tether would need to subject itself to requirements such as proving that the fiat reserves backing its $144 billion in issued USDT actually exist and abiding by the anti-money laundering (AML) provisions of the Bank Secrecy Act.

The Senate bill (GENIUS) imposes no such constraints on USDT use. The two bills will need to be reconciled before anything arrives on Trump’s desk for signing and it’s unclear whether there’s sufficient appetite in Congress to impose any limits on crypto whatsoever, so GENIUS just might win this legislative tilt.

Tether CEO Paolo Ardoino claims to be working on a backup plan to launch a new U.S.-specific stablecoin that would operate independently of USDT. On Monday, the Financial Times quoted Ardoino saying new competition sparked by U.S. passage of stablecoin rules could lead Tether “to create a domestic [U.S.-facing] stablecoin” that would serve primarily as a large-scale “settlement currency” for U.S. institutions. That would free USDT to continue serving as the go-to currency for money launderers, pig butcherers and terrorists. Win-win! 

Ardoino floated the same strategy last Friday in an interview with Decrypt—conducted from the offices of Cantor Fitzgerald, for what it’s worth—saying Tether needed “two products with two different value propositions.” Ardoino claims USDT’s focus should be on emerging markets, serving as a proxy dollar for individuals who lack access to traditional banking services.

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SEC’s crypto divorce continues

The SEC announced that the second of its ‘crypto round tables’ will take place on Friday (11), with the cutesy title of “Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading.”

However, the SEC said the “low-risk, readily-liquid assets” that allow a covered stablecoin issuer to honor redemptions on demand shouldn’t include “precious metals or other crypto assets.” That seems to be a clear shot at Tether, whose most recent reserve ‘attestation’ cited $8.2 billion in ‘secured loans,’ $7.85 billion in BTC  tokens, $5.3 billion in ‘precious metals’ and $4 billion in ‘other investments.’

The question is, does Tether care? If Congress is willing to carve out a USDT-sized loophole, who cares what the SEC thinks?

Regardless, the SEC declaring that stablecoins are somebody else’s concern isn’t that unusual, at least, not given the current makeup of the SEC, which has been steadily divorcing itself from involvement with digital assets ever since Trump was sworn in.

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‘A panoply of significant, additional risks’

Not everyone is pleased by the SEC’s new ‘whatever, dude’ approach. Take Caroline Crenshaw, the sole remaining Democratic-appointed SEC commissioner (whose renomination was blocked by the GOP-controlled Senate Banking Committee last December). Crenshaw may be living on borrowed time at the SEC, but she appears determined to go down swinging.

In a blistering statement opposing the SEC’s new stablecoin stance, Crenshaw called the announcement the latest in the SEC’s “jurisdictional carve-outs for crypto.” Crenshaw claimed the statement’s “legal and factual errors paint a distorted picture of the USD-stablecoin market that drastically understates its risks.”

For instance, Crenshaw notes that 90% of stablecoin users acquired them via exchanges, not via the issuer. Tether, for example, only issues to a handful of market makers and other whales while refusing to redeem USDT in any amount below $100,000.

As such, Crenshaw says that if exchanges prove “unable or unwilling to redeem the stablecoin, a holder has no contractual recourse against the issuer.” This creates “a panoply of significant, additional risks” that the SEC’s staff “does not consider” in its stablecoin assessment.

With issuers claiming no obligation to redeem tokens for individual users, these users “have no interest in or right to access the issuer’s reserve,” in direct contradiction of the SEC’s claim that users have a right to redeem on a 1:1 basis.

Crenshaw also takes exception to the SEC’s claim that all’s well if an issuer’s reserves are worth more than the sum of its issued tokens. Crenshaw argues that “the issuer’s overall financial health and solvency cannot be judged by the value of its reserve, which tell us nothing about its liabilities, risk from proprietary financial activities, and so forth.”

More to the point, “whatever claims issuers make about their reserves, stablecoin holders have unfortunately learned the hard way that these claims often turn out to be false.” Tether, for example, has never submitted its reserves to a third-party audit and has previously been caught fudging the facts (aka lying) about issued USDT being backed 1:1 with the dollar.

Summing up, Crenshaw says the “legal and factual flaws” in the SEC’s statement “feed a dangerous industry narrative about the supposed stability and safety” of stablecoins. The SEC’s references to stablecoins as a ‘digital dollar’ belies the fact that “there is nothing equivalent about the U.S. dollar and unregulated, privately-issued crypto assets that are opaque (clearly even to the staff), uncollateralized, uninsured, and laden with risk at every step of their multi-layer distribution chain.  They are risky business.”

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BitMEX dodges fine in the nick of time

Speaking of risky business, the BitMEX exchange’s three co-founders—Arthur Hayes, Benjamin Delo and Samuel Reed—and a fourth exec (Greg Dwyer) all received pardons from Trump in late March. The four execs previously reached settlements that saw each founder pay $10 million to atone for their willful violations of AML laws at BitMEX, but none of the men faced custodial sentences.

As part of its 2021 settlement with the CFTC and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), BitMEX was slapped with a $100 million penalty. On January 15 of this year, the Department of Justice (DOJ) hit BitMEX’s Seychelles-based parent company, HDR Global Trading, with an additional $100 million penalty for willfully violating the Bank Secrecy Act.

That last $100 million penalty was supposed to have been paid within 60 days of the judgment being entered into the federal court record. But The Intercept reported that Trump’s pardon extended beyond the four individuals to include HDR Global itself and came within “hours” of that payment deadline, meaning the $100 million penalty was effectively forgiven. So America’s coffers were denied $100 million in revenue, which seems kinda off-script, given Trump’s obsession with 
balancing the federal budget.

The last-minute timing of that pardon certainly invites cynicism, along with speculation as to what negotiations might have gone down to the wire. You’ll recall that before Hayes reached his plea deal with federal authorities, his attorneys were fighting hard to prevent a jury from hearing his infamous 2019 ‘joke’ about BitMEX choosing to be licensed in the Seychelles because the regulators there were easier to bribe.

As we pointed out around the time of the pardon, Trump’s DeFi project World Liberty Financial (WLF) entered into a ‘strategic partnership’ last December with Ethena Labs. That partnership will see WLF integrate sUSDe—the staked version of Ethena’s USDe stablecoin—into WLF’s as-yet-unlaunched token lending platform. Ethena has significant backing from Hayes’ family office Maelstrom.

Some token projects have alleged that WLF has offered to make ‘reciprocal’ token purchases from projects willing to buy millions of dollars’ worth of WLF’s governance token WLFI (from which Trump earns 75% of the proceeds). WLF has denied these allegations.

The Intercept quoted University of Missouri law professor Frank Bowman acknowledging that it was within a president’s power to pardon a corporation. But, combined with Trump’s dismissal of inspectors general and defanging of regulatory agencies, “Trump now seems to be systematically pardoning corporate malefactors left and right without respect, really, to any real serious consideration about the merits of the cases, the larger policy implications of issuing these pardons.”

Like the meltdown on Wall Street, this is only just getting started.

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