Baranyai: Trump’s crypto cash grab allows foreign influence

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Can you really call yourself an A-lister without your own product line? A celebrity fragrance or craft spirit is not just a licence to print money, it’s a status marker among the famous. There are risks, of course. You don’t want it to come off looking like a vanity project or a cash grab.

The best ventures are clearly passion projects, such as Dan Aykroyd’s diamond-filtered vodka or Naomi Watts’ menopause care line. The worst, however, can be downright disastrous.

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Some are clear failures of due diligence. Kathie Lee Gifford was stunned to learn her Walmart clothing line of $10 blouses was being manufactured in Central American sweatshops. Sometimes, the concept is inherently flawed. Describing Jessica Simpson’s (defunct) edible beauty line, one customer review claimed the Deliciously Kissable Belly Button Love Potion caused her to be “followed everywhere by bees.”

Then, there’s celebrity crypto, taking vanity projects to newly inflated heights. Personalized cryptocurrencies unveiled on the eve of the U.S. presidential inauguration are an explicit cash grab, flawed in both concept and duty of care.

Long before he entered politics, the Donald Trump had a penchant for slapping his name on things: skyscrapers, vodka, TV-order steaks.

Not that the merchandising ever stopped. The intermezzo between the 45th and 47th presidencies was characterized by huckstering best described as surreal, from  $400 gold sneakers, to digital trading cards bearing fantasy depictions of the septuagenarian as a buff astronaut and preening superhero.

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This new venture is a pivot for the president, who once described cryptocurrencies as “based on thin air.” Apparently that was before he realized he could make a lot of money with one of his own. The $TRUMP meme coin launched last Friday, indeed conjuring wealth out of thin air; by Sunday morning it was reportedly valued at more than $50 billion. The returning First Lady then launched her own meme coin, $MELANIA, which racked up $5 billion in two hours.

While the crypto sector has been generally giddy about the president’s return to office, this newest scheme to monetize the presidency has sparked a backlash. Many in the crypto industry want a coherent regulatory framework that might confer some legitimacy on a product largely associated with money laundering and tax evasion. Blatant grift rather undermines that goal.

It’s unclear how meme coins and other crypto products should be classified, The Hill reported this week: as securities, subject to the U.S. Securities and Exchange Commission, or commodities, regulated by the Commodity Futures Trading Commission. The first couple’s new meme coins suggest they are neither, disclaiming they are not “an investment opportunity, investment contract, or security of any type,” but rather “an expression of support.” In other words, don’t come knocking at the White House if you lose your shirt.

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Worse, they make it possible for anyone in the world to give untraceable money to the U.S. president, in direct violation of the emoluments clause of the Constitution, which safeguards against foreign influence by disallowing gifts from a foreign leader or government.

The danger doesn’t stop there. In 2022, Nobel Prize-winning economist Paul Krugman wrote a piece in the New York Times describing parallels between cryptocurrency and the predatory lending practices of the 2007 subprime mortgage crisis, which triggered a global financial meltdown.

Sweatshops and bad cosmetics don’t hold a candle to the potential fallout from a celebrity presidential cryptocurrency.

Krugman recalled the unheeded warning of former Federal Reserve official Ned Gramlich: “Why are the most risky loan products sold to the least sophisticated borrowers?” he asked. “The question answers itself … [they] are probably duped.”

write.robin@baranyai.ca

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