Crypto’s Trojan Horse: Deregulation in a digital disguise

In an impassioned Financial Times opinion piece, the author issues a stark warning: the United States is sleepwalking into its next financial crisis under the seductive guise of crypto innovation and bipartisan deregulation. Drawing a pointed comparison between today’s crypto push and the financial liberalisation that fuelled the 2008 global meltdown, the writer accuses lawmakers — from both parties — of enabling speculative risk in pursuit of campaign donations and political gain.

The central concern revolves around the recent passage of the Genius Act, legislation pitched as a regulatory breakthrough that would stabilise the crypto market, especially stablecoins, by requiring them to be backed 1:1 with US dollars. Yet, the author argues, such guarantees do little to contain the inherent volatility of crypto assets like bitcoin, which remains a highly speculative, high-beta investment — closely tracking and amplifying the stock market’s moves. According to a Fidelity study cited, bitcoin’s three-year rolling beta to the S&P 500 sits at a staggering 2.6, underscoring the danger of integrating it into the core of the financial system.

JPMorgan Chase’s move to consider lending against crypto collateral is presented not as a sign of innovation but as a red flag — reminiscent of how deregulated derivatives paved the way for the 2008 crisis. The piece draws an unflattering historical line from the 2000 Commodity Futures Modernization Act, to the erosion of Dodd-Frank protections in 2018, and now to the Genius Act — all of which weakened oversight in the name of progress. Each time, bipartisan consensus enabled the erosion.

The op-ed also highlights the growing influence of crypto lobbying in US politics. With crypto-aligned political action committees pouring millions into campaign coffers, traditional sceptics like Senators Elizabeth Warren and Sherrod Brown have been outgunned. While a majority of Senate Democrats opposed the Genius Act, influential names such as Mark Warner and Kirsten Gillibrand tipped the scales. As the author puts it, “money talks” — and the crypto lobby is shouting.

The potential fallout? A perfect storm. The Federal Reserve, still navigating inflation and interest rate hikes, could spark market turmoil that would hammer crypto hardest. Shadow banks and traditional financial institutions with crypto exposure might buckle, freezing credit and forcing Treasury fire sales. With major crypto companies like Tether holding more US government debt than some nation-states, redemptions could destabilise bond markets — and Main Street may once again be asked to bail out Wall Street.

Finally, the political consequences may be just as severe. The piece warns that financial pain linked to bipartisan crypto deregulation could further deepen public cynicism, fuelling populism and setting the stage for a resurgence of Trumpism — especially since Trump himself has embraced and invested in crypto.

In essence, the op-ed paints crypto not as the future of finance, but as a digital Trojan Horse — ushering in risk, volatility, and political decay under the banner of innovation and freedom.

By Vugar Khalilov