My wife and I have a ventilation problem. No, this is not a metaphor. We literally have a problem with the ventilation system in our bathroom. This is the system that carries away the bad stuff. Moisture. Odors. Pollutants. It all gets sucked up by the exhaust fan, the same one which may be above your head as you read this post on the toilet. The fan pushes air upward through a plastic pipe, eventually emerging through the roof to release the bad stuff into the ether. But I don’t need to explain this. Not to my readers. At the risk of sounding presumptuous, I think my writing appeals to an elite audience of regular bathroom users.

There is, however, another ventilation pipeline you may have never considered. One that carries gas away from your sewage system. This is a very important pipe. Without ventilation, septic tanks can explode: a real stink bomb. But it’s also important that this pipe is separated from the one connected to your bathroom ceiling. I can’t stress this enough. What you want are two pipes, one for each source. And you want the border between them to be firmer than the DMZ.

But not everyone respects these borders. That includes a mysterious contractor, hired by the previous owners of our house, who concluded that it would be a good idea to connect these pipes. The result is a vicious cycle. That which won’t be named is flushed to oblivion, only to return to the scene of the crime in gaseous form. The only defense is constantly keeping the exhaust fan running. Every minute these defenses are down is an opportunity for the enemy to return. In 1321, Italian poet Dante envisioned nine circles of hell in his Divine Comedy. This is the tenth.

But we’re not the only ones with this problem. Because there is an increasingly strong smell coming from the crypto world. For years, the U.S. has been building, in fits and starts, a ventilation system for digital assets. Like any ventilation system, it is supposed to have two separate pipes. One flushes bad actors down the drain through criminal prosecution and regulatory enforcement. The other provides fresh air for legitimate innovation. This includes clear rules which encourage entrepreneurship and reassure investors that their cryptokitty investments are safe.1

The construction of this system has not gone smoothly. Congress has been very slow to provide legal clarification.2 And many crypto enthusiasts have criticized the SEC of engaging in “regulation by enforcement.”3 Specifically, they allege that the nation’s securities regulator has sought to immediately punish firms for apparent violations rather than specifying their expectations in advance.4

Nevertheless, the system has provided some clarity. It was established, for example, that operating the world’s largest Bitcoin-based online drug market is bad.5 It was also established that crypto exchanges cannot ignore their Anti-Money Laundering (AML) obligations.6 And they definitely should not be providing a special service, one reserved for VIPs, in which they tip-off customers that they are the subject of a law enforcement investigation.7 It was becoming clearer, in other words, what type of activity should be flushed down the drain.

But, *sniff*, do you smell that? It’s a peculiar stench. It’s the smell of Trump granting pardons to every convicted criminal referenced in the previous paragraph (or, in the case of Binance, dropping the SEC’s lawsuit).8 It’s also the smell of Trump disbanding the DOJ’s National Cryptocurrency Enforcement Team.9 And it’s the smell of Trump releasing a personal meme coin, running a contest to see who can bribe invest the most, and hosting a dinner for the winners.10 This reeks. And nobody should be more upset about the smell than the cryptocurrency industry itself.

Fresh Air

It’s often claimed, particularly by your uncle at Thanksgiving, that regulation is bad for business. There’s some truth to this. Regulation imposes real costs, costs which often disproportionately impact smaller businesses. And, indeed, that’s why big businesses so often support regulation. It can be a useful tool for imposing costs on competitors and raising “barriers to entry.”11 This is one of the most important observations made by political economists.12 Namely, that regulation is not just some neutral attempt to correct market failures in the public interest.13 It is, instead, a political construct, one that produces winners and losers.

But private incentives for regulation aren’t always a bad thing. Sometimes public and private interests are aligned. Take, for example, the European Union’s application of AML rules to crypto. Before finalizing its rules, the EU consulted with big players like Circle, Bitstamp, and industry lobbying groups.14 Their response was emphatic: please regulate us! But this wasn’t primarily driven by a desire to do the right thing. It was, first and foremost, good for business. As the EU recounts:

…the VC [Virtual Currency] industry was generally favourable to legislation that would primarily give them more legitimacy and, secondly, would help to differentiate between players that make the most concerted efforts to track criminals from bona-fide users.15

What they wanted, in other words, was a crypto ventilation system. One that flushes bad actors down the drain while making it clear that their venues aren’t polluted with crime. This is a smart strategy. Crypto trading venues have a well-earned reputation for criminality.16 So it makes sense to position yourself as the safe alternative. And that is precisely what exchanges like Gemini — founded by the Winklevoss twins — have done. They have lobbied to be regulated. And, in so doing, they have broadcast that they are the good guys. The ones fighting for a safer crypto world. Heroes you can trust with your valuable investments, like a meme coin whose underlying value is a picture of a cute dog in a hat (Dogwifhat: $WIF).17

And this is broadly fine. If it leads to better regulation, who cares if their efforts are self-interested? But it takes two to tango. And the SEC, under the leadership of Gary Gensler, wasn’t interested in dancing. They unleashed a flurry of enforcement actions against Coinbase,18 Binance,19 and Gemini.20 By the end of 2024, Gensler’s SEC had brought 125 cryptocurrency-related enforcement actions, representing more than a 78% increase over his Republican predecessor.21

From Gensler’s perspective, this was simply the enforcement of existing securities laws to protect investors. An act that actually benefits the market:

…innovations don’t long thrive if they don’t also build trust. I mean the automobile wouldn’t have survived if you didn’t have traffic lights, if you didn’t have stop signs, and even cops on the road to make sure you didn’t have accidents. So that’s part of our role, is being cops on the beat…

But the big exchanges were furious. Coinbase, for example, reacted with thinly-veiled anger to being sued. They felt that they had been demonstrating a good faith effort to understand their obligations. “But after months and months of sharing ideas with the SEC,” recalled Chief Legal Counsel Paul Grewal, “On the eve of the meeting when the SEC had promised to give us feedback…instead the SEC called off the discussions altogether.”22 Similar frustrations were expressed by other major players, leading to the anointment of Gensler as crypto’s biggest enemy. Marc Cuban, comparing U.S. regulation to other jurisdictions, summarized the industry’s view: “this is uniquely an American Gary Gensler problem.”23

Trump seized on the opportunity. He recognized that crypto increasingly represented an angry voting bloc, one that felt stifled by a Democratically-appointed regulator (and, even worse, a professor). Influential crypto figures like the Winklevoss twins flocked to his campaign, celebrating his promise that, “from the day I take the oath of office, Joe Biden and Kamala Harris’ anti-crypto crusade will be over, it will end, it will be done.”24 He has certainly kept that promise. But not in a way which provides the ventilation system desired by the industry. To the contrary, he has conjoined the pipes, connecting the septic tank to the air it breathes.

Cesspool

The filet mignon was, apparently, “trash.” More like a “Walmart steak” than a prime cut of beef. At least that’s how it was described by Nicholas Pinto, an influencer attending Trump’s private gala at his Virginia golf club.25 Pinto was one of 220 people invited to dine with the President on May 22nd. But it wasn’t because he was a policy expert or even a traditional campaign donor. He was, instead, one of the 220 largest holders of Trump’s personal meme coin: $TRUMP. But he didn’t actually meet the President. That VIP privilege was reserved for only the top 25 investors.

It was, in effect, a contest to purchase influence. Trump announced the creation of his meme coin just three days before his own inauguration. Simultaneously, the First Lady released her own Melania coin ($MELANIA). Both coins attracted billions in investment — raising questions as to who had prior knowledge of their release — before crashing in spectacular fashion. Melania coin, initially valued at about $8.49, quickly dropped by 96% and, at the time of writing, trades at about $0.32.26

But Trump apparently had a plan to recharge his coin’s value. He would host a dinner, releasing tickets to those most committed to stimulating the currency’s price. As the official website instructed:

From April 23 to May 12, hold as much $TRUMP as you can. Your average holdings during this period will determine your ranking. The more $TRUMP you hold—and the longer you hold it—the higher Your Ranking will be.27

This event has attracted a lot of attention. But not nearly enough. Because it is not just an obvious attempt to boost the price of his coin. Nor is it merely a conflict of interest which provides a vehicle for bribery. It is also the complete debasement of the Office itself, one that transforms the White House from the pinnacle of the Free World to a cheap pyramid scheme. It will never recover from these indignities — certainly not in our lifetime. And this is bad for the cryptocurrency industry.

Many crypto enthusiasts recognize this. At the Bitcoin 2025 conference, naturally held in Las Vegas, attendees expressed their concern about the President hawking his own meme coin.28 One Bitcoin investor, while expressing his love for Trump, worried that it would not be much better than the ‘Hawk Tuah’ coin, which is viewed by many as an illegal pump-and-dump scheme.29 And there is recognition that the President’s coin may prove counterproductive. As another Trump-supporting Bitcoin enthusiast told the AP, “It’s distasteful and an unnecessary distraction…We would much rather that he passes common-sense legislation and leave it at that.”30

Connecting the Pipes

But it isn’t just Trump’s own coin that’s a distraction. It’s also his decision to radically reverse 10 years of enforcement efforts. Trump has halted or dropped at least 89 enforcement cases, including high-profile SEC actions against Coinbase, Kraken, Robinhood, OpenSea, Gemini, and Justin Sun.31 And then there are the pardons for convicted criminals. Trump has pardoned Ross Ulbricht, who, in addition to founding the Silk Road online drug market, once sent $150,000 to an anonymous hitman to kill a user threatening to reveal his identity.32 And Trump, ever the legal pioneer, has also issued the first ever Presidential pardon to a corporation: the entity which owns cryptocurrency exchange BitMEX.33

Perhaps some of these reversals are warranted. Perhaps, in some cases, the SEC was a little too trigger-happy (and maybe a double life-sentence for Ulbricht was slightly excessive: the assassination never happened).34 But Trump is throwing the baby out with the bathwater. Take, for example, Binance. The very first post of this Substack analyzed the DOJ’s enforcement action against the exchange. The SEC filed its own separate lawsuit. And the facts are astonishing:

• Binance required zero Know-your-customer (KYC) checks for customers withdrawing up to two Bitcoin per day (equivalent to $130,000 at its height).35

• Binance knew it was operating as an unlicensed exchange in the U.S. As its Chief Compliance Officer wrote, “we are operating as a fking [sic] unlicensed securities exchange in the USA bro.”36

• Binance encouraged customers to circumvent its own geographic blocking of U.S.-based IP addresses by using a VPN service to conceal their location.37

• Binance actively encouraged “VIP” customers to create offshore companies to avoid having to report a U.S.-nexus during the KYC process.38

None of this can be attributed to a lack of regulatory clarity. Binance wanted access to the U.S. market without the regulatory exposure, and, per the SEC, it went to great lengths to conceal its courting of American customers.39 But withdrawing the lawsuit allows Binance to change the narrative. Surely this wasn’t political. No, it must have been a problem with the case. As Binance touted:

Would the SEC walk away from a case like this if there were still fire behind the smoke, with some of the Commission’s concerns remaining unaddressed? Unlikely… With [our] compliance program validated, the default posture of suspicion no longer holds up…We're grateful to…the Trump administration for standing up for progress. They recognized that responsible innovation needs rules rather than roadblocks (emphasis added).40

Rules rather than roadblocks. It’s what the big cryptocurrency exchanges have always wanted. A crypto ventilation system, one that flushes bad actors down the toilet while providing fresh air for legitimate innovation.

But the smell is becoming unbearable. Trump, by rapidly dismantling the U.S. crypto enforcement apparatus, is allowing the sewage to seep back in. And nothing reeks more than his own meme coin. The crypto community should be furious. Enormous effort has been made to create a legitimate market for digital assets, one that can be distinguished from its seedy underbelly. But Trump’s actions pollute the reputation of the entire industry. He is, in other words, connecting the pipes. And I can tell you from personal experience that, once those pipes are connected, splitting them up again is easier said than done.