The Trumps Are Selling Coins. Will Regulators Come Knocking?

The Trump Organization and affiliates own 80% of $TRUMP coin tokens, which are subject to a three-year unlocking period. Any price appreciation caused by frenzied buying boosts the Trump family fortune, at least on paper. The Trump family businesses and their partners have benefited from more than $300 million in revenue generated by trading in the coin, according to the blockchain firm Chainalysis. A percentage of each trade is routed to crypto wallets linked to the coin’s creators, similar to a transaction fee.

When Mr. Trump issued his meme coin days before his inauguration, he said the point was to “have fun.” As we noted at the time, the venture creates political risks and ethical conflicts. Bloomberg News last week reported that all but six of the top 25 holders of the $TRUMP coin that have registered on the website’s leaderboard have bought the coins using exchanges that claim to exclude U.S. customers.

This suggests most of the buyers are overseas. Foreigners are prohibited from contributing to U.S. political campaigns, but there’s no bar on them buying stock in a politician’s business. That’s effectively what foreign buyers of Mr. Trump’s tokens are doing. Might some be trying to buy goodwill with the Trump Administration?

Then there’s the Trump family’s other crypto venture, World Liberty Financial, which has raised $550 million through token sales since October. A business entity affiliated with Mr. Trump and his family members owns a major chunk of World Liberty. Its tokens can’t be publicly traded like most crypto-currencies, though coin owners supposedly get a vote on the company’s governance.

DWF Labs, a crypto firm based in the United Arab Emirates, announced last month that it had bought $25 million of World Liberty Financial’s tokens. “Our visibility in the U.S. has been increased because of this deal,” a DWF Labs managing partner told the New York Times. “We would like to have direct dialogue with the policymakers.” No doubt.

Zach Witkoff, son of Trump diplomatic envoy Steve Witkoff, co-founded World Liberty Financial and helps run its day-to-day operations. Could he make the “dialogue” happen by pinging his dad, another co-founder? The younger Witkoff said this month that Abu Dhabi would use World Liberty Financial’s newly minted stablecoin to invest $2 billion in the crypto exchange Binance.

The deal will boost the Trump stablecoin and give World Liberty more assets to invest. Binance in 2023 pleaded guilty to violating U.S. anti-money laundering laws and sanctions. Its co-founder Changpeng Zhao also pleaded guilty to violating the Bank Secrecy Act. Media reports say Mr. Zhao is seeking a presidential pardon.

Zach Witkoff also met last month with Pakistan’s Prime Minister Shehbaz Sharif and army chief of staff Asim Munir. Afterward, World Liberty Financial announced a deal with the Pakistan government to accelerate crypto adoption in the country.

The Trumps’ crypto peddling is especially ill-advised because the Administration will regulate crypto products and practices. Democrats are already accusing the Securities and Exchange Commission of giving the Trump crypto businesses a pass. On Thursday Democrats blocked a Senate floor vote on bipartisan legislation to create a framework for regulating stablecoins. The crypto industry backs the bill, but now Democrats are demanding tougher rules and enforcement.

Expect the press to spend the next four years chasing stories about the Trump crypto family. The political optics are awful, especially in light of the Trump border taxes. The Democratic midterm campaign ads write themselves: Millions in secretive crypto profits for the Trump family, but Mr. Trump’s famous “two dolls” and “five pencils” for everyone else.