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perspective

Donald Trump’s Crypto Blind Spot

Oliver Bullough

A day after Donald Trump was inaugurated, the U.S. Securities and Exchange commission said it was creating a new task force to create new rules for the crypto industry, thus starting the process to reverse a crackdown on crypto companies under the previous administration. The news was celebrated as a “win” for the industry, with many expecting Trump to pass executive orders to reduce scrutiny and relax regulatory enforcement. 

But even what scrutiny exists fails to pass muster. Elliptic, the crypto-compliance company, has been publishing some frankly terrifying reports about the online marketplace Huione. For those of you who haven’t used its services, Huione is an e-commerce site in Southeast Asia where you can buy data, technology, and money laundering services, and it’s pretty central to the “pig butchering” form of online investment fraud, run from compounds in Myanmar, Cambodia and elsewhere. 

Pig butchering is a term used for scams in which the victim’s trust is gained before they are persuaded to part with their money. Many of the people executing these scams have been forced into the work by organized criminal gangs. As the Elliptic report explains: 

“Those being defrauded are not the only victims. Reports suggest that scam compounds commonly resemble prisons, acting as both workplaces and accommodation blocks and surrounded by tall barbed wire fences and actively patrolled by security guards. They are estimated to house hundreds of thousands of workers, many of whom have been effectively enslaved.”

Although Huione has launched its own cryptocurrency, most traffic on the web site is conducted through Tether or USDT, which is a so-called stablecoin pegged to the US dollar, and extremely cheap to use. Tether is the world’s most traded cryptocurrency. It is also pretty perfect for online criminals, since it lacks the volatility or expense of other forms of cryptocurrency, while simultaneously lacking the oversight from bank compliance departments or law enforcement agencies that using dollars would bring.

Tether says it’s doing a lot to fight financial crime but its name just keeps cropping up in investigations. It was implicated in a money laundering scheme revealed last month by British law enforcement, in terrorist financing, North Korean scams, fentanyl smuggling, and much other criminal activity. So it would be nice to think that the new Trump administration is going to take a hard look at the existing regulatory framework.

But Trump (and his wife) launched meme coins just before his inauguration that, on paper, added billions to their wealth. Musk, a key advisor to Trump, endorses cryptocurrencies. And Howard Lutnick – Trump’s pick for Commerce Secretary – heads a financial services firm that not only has done a huge amount of business with Tether but also reportedly owns five percent of it. So, let’s be honest, he’s probably going to leave it alone. No wonder the crypto industry is celebrating.

Under Joe Biden’s watch, Tether was being investigated for its links to illicit finance, including its use by Russian arms dealers. But the future of these investigations is unclear.

BIDEN’S HOLLOW WARNING 

The outgoing president left office with a speech that he should have made four years ago, if not earlier. 

“An oligarchy is taking shape in America of extreme wealth, power, and influence that literally threatens our entire democracy, our basic rights and freedoms, and a fair shot for everyone to get ahead,”he said, while warning of the “tech-industrial complex.”

I lived in Russia when Vladimir Putin became president, and watched over the next few years as he and his cronies, who became billionaires, cemented their control over state resources. They used the courts, the institutions of the state, the media, and more to bully, coerce and jail anyone that got in their way.

Last week I was reminded of how in 2006 the Kremlin used the threat of environmental enforcement proceedings to bully a group led by the oil company Shell into giving up its large stake in the Sakhalin-2 project, worth tens of billions of dollars, to state-owned Gazprom. Shell’s supposed violations of environment regulations were forgotten about as soon as Gazprom had taken control. The people in power cared about the money, not the grey whales and sensitive salmon fishing areas that conservation groups said the project adversely affected.

I see a worrying parallel between this inglorious episode, of a state using its legislative machinery to wrest control of a project, and the troubles faced by TikTok in the United States. I am not here to advocate for social media companies, any more than I am here for the oil majors, but I do believe that in a democracy, the law has to be used fairly, rather than as a tool to force the owners of profitable assets to hand them over. And that is why this Bloomberg headline is alarming – “China Weighs Sale of TikTok US to Musk as a Possible Option. 

President Trump has extended by 75 days the deadline for the app’s Chinese parent company ByteDance to divest. He has suggested that the U.S. enter into a “joint venture” with ByteDance, without explaining what exactly he means. And Elon Musk, using his platform on X and his current political heft, said that while he was against a ban, on free speech grounds, “the current situation where TikTok is allowed to operate in America, but X is not allowed to operate in China is unbalanced. Something needs to change.” 

We are entering a dark time if the US starts treating foreign companies in the same way that Putin’s Kremlin did. So, while I agree with Biden’s warnings about oligarchy, I feel about his speech like I felt when Kamala Harris said Donald Trump was a fascist during the election campaign: where’s the urgency? Why didn’t Biden do something about it when he was the most powerful man in the world? 

There’s a parallel in the United Kingdom, where politicians are alarmed about the tidal wave of money that submerged democracy in Washington DC, and worry about the prospect of Elon Musk doing the same thing in London. But they’re not moving urgently to strengthen the electoral laws that would allow him to, and instead talk about maybe doing something in a couple of years.

Here’s the lesson from Moscow: once oligarchs have power, they don’t give it up. The time to save democracy is when it still exists. And giving a speech – no matter how sonorous, or how many references to Dwight D. Eisenhower it contains – is not the same as taking action. Plug the loopholes. Break up the monopolies. Do something.


TULIP SIDDIQ FALLS ON HER SWORD

Meanwhile in Britain, measures to tackle the flow of corrupt money and overhaul the country’s “highly fragmented” anti-money-laundering regulatory system will likely be slowed by the loss of anti-corruption minister Tulip Siddiq. 

She chose to resign, ironically, after being linked to a corruption scandal in Bangladesh. Shortly before Siddiq resigned, the anti-corruption coalition, a group of NGOs including the prominent Spotlight on Corruption, noted :

“In light of an investigation launched last week by the Prime Minister’s independent advisor on ministerial interests, and developments in separate investigations in Bangladesh, the Coalition concludes that she currently has a serious conflict of interests.” 

Siddiq, a member of parliament since 2015, is the granddaughter of Sheikh Mujibur Rahman, the first president of Bangladesh, and the niece of Sheikh Hasina, who was prime minister of Bangladesh until she resigned and fled the country after weeks of mass protests last summer. Media outlets have reported troubling ties between Siddiq and some business people associated with her aunt, who has been charged with large-scale human rights abuses. One such businessman apparently gave Siddiq a two-bedroom apartment in central London. 

Siddiq insists she’s done nothing wrong but, for a government that has pledged to fight kleptocracy, this was – to be polite – not a good look. Although I suppose it should be a relief that there are still politicians out there with a sufficiently developed sense of shame that their response to a scandal is to resign rather than to laugh.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.