Accounting
President Donald Trump launched his own cryptocurrency, here’s what bankers need to know
Chip Somodevilla/Bloomberg
President Donald Trump ventured into the crypto-sphere with a new coin released shortly before his inauguration. Like all alt coins, it is subject to volatility and uncertainty. Here’s what bankers need to know, to aid their own decision making and to advise their customers.
It’s a meme coin
Featuring the now-iconic image of Trump raising his fist in the air following the failed assassination attempt over the summer, the new coins named TRUMP and MELANIA fall into the bucket typically called “meme coins,” meaning its value is tied to their personas and brand.
“The way I would describe it is they’re collectors’ items. That’s where people get involved: They get excited about the hype — the president has just been elected and they want to participate in any way they can,” said Rob Krugman, chief digital officer at Broadridge.
“One that I think you often come back to is Dogecoin, another meme coin, and that grew in value largely associated with celebrity, in that case, Elon Musk,” Krugman said.
The current venture is not backed by anything tangible, aside from the celebrity factor, meaning it has no inherent transactional or economic value. The coins are being sold on the Solana Blockchain network via Moonshot, an app that lets people buy meme coins in a variety of ways typical to online shopping: Apple Pay, credit and debit card, Paypal, Venmo and using other crypto currencies.
Seoyoung Kim, an associate professor of finance at USC, likened them to beanie babies.
“This is sort of like, where did the value of beanie babies come from? The meme coins are like your digital beanie babies,” Kim said, and they might have sustained popularity, or they might not.”
The coin’s website states it is “the only Official Trump Meme, by President Donald J. Trump.” The fine print further clarifies:
“Trump Memes are intended to function as an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol ‘$TRUMP’ and the associated artwork, and are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type.”
The MELANIA coin provides a similar disclaimer, noting the coins are “digital collectables” that “are not intended to be, or to be the subject of, an investment opportunity, investment contract or security of any type.”
Think of these coins like concert tickets
Kim used concert tickets as an analogy for why someone may get involved.
“There’s only two legitimate reasons to buy a concert ticket: You really, really like the artist and you plan to use your concert ticket to gain entry into that performance, or you don’t care about the artist but you think that other people will care, and you think you’ll sell that to get at a higher price later,” Kim said.
“But it would be totally ridiculous if you said that you’re buying a concert ticket because you think Lady Gaga is innovative and you want profit participation,” she said.
The TRUMP and MELANIA coins are similar in that people may purchase them to show support for the president and they believe in him or because they believe other people will pay more for them down the line, but not because they expect to receive dividends from the Trump Organization’s businesses.
Currently, CIC Digital LLC, an affiliate of the Trump Organization, and a related firm managing the coin’s launch, Fight Fight Fight LLC, own about 80% of the tokens. The latter firm only recently incorporated and its ownership is unclear. In April, holders will be able to begin to sell off their share of the coins, which will continue to unlock over the next three years with 200 million tokens available immediately and ultimately at the end of the three-year period, 1 billion in circulation.
There’s potential future value
It’s unlikely, but it’s possible that the coins could evolve like Ether into a method of payment at places that accept it. Kim noted crypto has the ability to shift categories over time.
“ETH was always a utility token to transact on Ethereum, but it became so popular that people also accept it as currency, as a medium of exchange. So it has the ability to evolve,” she said.
Krugman agreed and likened it to Dogecoin.
“I see comparisons to Dogecoin,” Krugman said. “Dogecoin had a hype factor associated when it first came out and one of the interesting things that happened is as a result of that interest, you started to see utility be associated with that coin for things like payments, and now there’s a large community of developers that are essentially building on top of it and extending the underlying protocol so that people can do interesting things with it.”
The coin reached a market capitalization of over $10 billion on its first day, making it at that time, the second-largest meme coin by market capitalization, behind only Dogecoin. As of Monday, the market cap has dropped to about $5.3 billion.
“There’s a community of holders that are participating. The question becomes, where does that go? Does that become a utility use case? Is there a payment use case? Or is there another type of use case where people start building on top of it?” Krugman said.
Clients should wade in educated and clear eyed
Crypto can be extremely volatile – something already seen in the TRUMP rollout. The coin was put to market late at night on the Friday before his inauguration a week ago. It quickly soared in value, shooting from $6 to $75 in 36 hours, up more than 1100%. By last Tuesday morning, three and a half days later, it fell to below $40.
The coin is trading at around $27 as of Monday morning.
“Crypto mentality is still looking for a lottery-like payout,” Kim said. “And the lottery-like payout is only possible if you concentrate in one thing because if you’re widely diversified, you’re not just cutting off your downside, you’re cutting off your extreme upside as well. If, for example, you had just picked Tesla and everything is going well, then you now have a lottery-like upside where if you had been wisely diversified, you wouldn’t have the same kind of upside.”
A disclaimer on the website offering the president’s coin warns buyers the price “may be extremely volatile and you may experience substantial losses in connection with a sale or other disposition of Trump Memes.”
Most importantly, bankers should advise their clients to know what the coins are. Because the meme coins are tied to virality and cultural popularity, measures that are difficult to quantify, buyers can’t rely on traditional investor methods like reviewing balance sheets and income statements, or looking at trade flow and GDP growth as currency traders do.
“How do you make sure that the people who are buying it actually know what they’re buying? If it is a collectible, let’s make that clear to them. It’s a meme coin; there’s not an intrinsic use case associated with it right now, but that doesn’t mean there will not be a use case associated with it in the future,” Krugman said.
Broadridge, where Krugman serves as chief digital officer, recently released a product that aggregates all relevant information about crypto coins in one place as a solution to the issue.
“How do you ensure that people participating in the market have an understanding of what these assets are?” Krugman said, adding clients can then make decisions on what to buy from there. “No one’s suggesting that people should not be able to buy or sell these things, but how do you make sure that people have access to the appropriate information to make that informed decision?”
Jonathan Zeigler, managing principal at Baker Tilley, noted further regulation may bring clarity.
“Any potential buyer needs to make sure they really understand what they’re getting into, and that’s where further and more clear regulation could help,” Zeigler said. “What are the rules around marketing these? What are the rules around what disclosures need to be made to investors about the rents and the potential risks and things they need to understand?”
“Regulation, I think, will help increase investor confidence, and then just more kind of flows into it,” Zeigler said. “A big game changer last year was the approval of the spot ETFs for Bitcoin and Ethereum, that provided more investor confidence because now these are regulated just like any other ETF.”
What this signals for regulation
The coin’s launch is the latest sign that this is a crypto-friendly administration.
Even before taking office, Trump vowed to “be the crypto president” at a campaign fundraiser, and over the summer declared at a bitcoin conference in Nashville he would make the United States the “crypto capital of the planet.”
Trump
Zeigler said the crypto community has taken these steps to be positive signs.
“The crypto community believes it is good, because, not saying this was intentional, but the way that the regulations were being put out, or the enforcement actions were done previously, it created much higher barriers to entry, which, of course, could limit innovation. You had entities that were moving to offshore jurisdictions, because it was unclear what the regulatory environment was here,” Zeigler said.
“Trump has said, publicly, effectively, he wants the United States to be the crypto capital of the world. He wants the innovation to happen here; he wants the companies to be domiciled and registered here; and in order to incentivize them to do that, there has to be clear regulatory goals,” Zeigler said. “Once people know the rules of the game, they’ll be more willing to make a business decision asking, do we want to enter this space.”
The sentiment has also been reflected in the market: Before Monday’s drop, Bitcoin was up more than 50% since the November election. The cryptocurrency hit a record peak of $109,241 shortly before Trump’s inauguration ceremony.
The White House today issued an
The reserve will treat bitcoin, the first and most popular blockchain-based cryptocurrency, as a reserve asset. It will be capitalized with tokens owned by the Department of Treasury that was forfeited as part of criminal or civil asset forfeiture proceedings. Other agencies, such as
The U.S. Digital Asset Stockpile, meanwhile, will consist of digital assets other than bitcoin owned by the Department of Treasury that was forfeited in criminal or civil asset forfeiture proceedings. Versus the bitcoin reserve, the government will not acquire additional assets for the U.S. Digital Asset Stockpile beyond those obtained through forfeiture proceedings. Also unlike the bitcoin reserve, the Secretary of the Treasury may determine strategies for responsible stewardship, including potential sales from the U.S. Digital Asset Stockpile.
The executive order also says that agencies must provide a full accounting of their digital asset holdings to the Secretary of the Treasury and the President’s Working Group on Digital Asset Markets.
The administration justified the decision by saying that, with a fixed supply of 21 million coins, there is a strategic advantage to being among the first nations to create a Strategic Bitcoin Reserve, though it did not elaborate. It also said that the government currently holds a significant amount of bitcoin but has not maximized its strategic position as a unique store of value in the global financial system. It decried $17 billion worth of what it called “premature” sales of bitcoin. It also pointed out that there has not been a centralized policy for managing digital asset reserves held by the government, so right now holdings are scattered throughout different departments.
“Taking affirmative steps to centralize ownership, control, and management of these assets within the Federal government will ensure proper oversight, accurate tracking, and a cohesive approach to managing the government’s cryptocurrency holdings. This move harnesses the power of digital assets for national prosperity, rather than letting them languish in limbo,” said the executive order.
Dr. Sean Stein Smith, a Lehman College accounting professor who is also chair of the Accounting Working Group in the Wall Street Blockchain Alliance, said that while the executive order only sets up a framework for now, there will be significant implications further down the road. One possibility is an increased emphasis on crypto audits, as David Sack, AI and Crypto Czar, stated multiple times that one of the first pieces of business to move the E.O. forward would be to conduct on audit of current U.S. holdings. With buy-in from the Executive branch, and the emphasis on the importance of crypto audits, said Smith, the profession has an opportunity to expand efforts to standardize the currently disparate crypto audit practices.
Another impact will be client FOMO, as people may reason “after all if it is good enough for the U.S. government it should be good enough for me?” It will be especially important for accountants to educate clients about the risk and opportunities of crypto investments as well as to provide advisory services to those clients interested in integrating crypto into operations.
“In short the E.O. establishing an SBR and digital asset stockpile are set to further propel interest in crypto investments and utilization at clients of all sizes. The emphasis on high quality crypto audits, internal control and advisory opportunities as more investors (retail and institutional) potentially move into the sector, and the inevitable tax issues that will arise as a result all present opportunities for the profession,” said Smith in an email.
AI governance was a major theme of 2024, and as the technology continues to evolve, oversight and control—as well as ways to demonstrate it to others—will become even more important this year.
This was the assessment of Danny Manimbo, a principal with Top 50 firm Schellman, who is primarily responsible for leading the firm’s AI and ISO practices. Speaking during the firm’s Schellmancon event today, he said that last year saw the release of a number of AI governance frameworks, including the National Institute of Standards and Technology’s AI Risk Management Framework, the International Standards Organization’s ISO 42001, and Microsoft’s revisions to its Supplier Security and Privacy Assurance Program to account for AI. Meanwhile, actual regulation is also gaining momentum, with Manimbo pointing to the EU’s AI Act, South Korea’s AI Basic Act, and a number of state-level regulations such as California’s
“That kind of set the tone for a lot of the inquiries and the interest that we saw, and for the trends on where GRC was going in 2024, maybe not so much immediately in the beginning of the year, because the frameworks were so new, but I think they were boosted by a number of things in the regulatory standpoint,” said Manimbo.
The other panelist, Lisa Hall, chief information security officer for the trust platform SafeBase, added that, given the pace of AI advances, it is likely that last year’s measures were not the end but just the beginning, especially considering how widely used even the current generation of solutions is.
“I think it’s only going to increase, and everyone seems to have some type of AI offering,” said Hall. “Regulations and standards will likely become more demanding, and even with the shadow IT capabilities we have now, I worry that we may be underestimating how often AI technologies are actually used by our employees. And also, on the flip side, how can we best leverage these to make our lives easier?”
Manimbo noted that, with this rise in control frameworks and regulation, this year will also see a rise in demand for ways to demonstrate that one is aligned and compliant with them. The ISO 42001 certification, for which Schellman
Such demonstrations are vital for establishing customer trust in a world that is increasingly connected. Hall noted that supply chains have grown much more complex, which has allowed attackers new opportunities to target vendors or third party software providers and compromise multiple downstream organizations at once. In such an environment, establishing trust with a customer is vital, but it can often involve lengthy and tedious audits filled with manual processes. While she has had success with some automation, such as using AI to reduce time on customer questionnaires and automate access controls, there remain many things that still need human intervention.
“I’ve definitely struggled with that, like where an auditor is asking for data sets, you’re coming back with a sample set, you’re bouncing back and forth from a tool to gather evidence, and it becomes even more complex when you’re dealing with customer audits and you’re talking to more than one auditor, and you can only reuse evidence for so long that evidence goes stale,” she said. “And then a lot of times, auditors have competing platforms and tools that may not integrate with yours. So it’s still a manual process. There’s a ton of back and forth communication there. I’m still copying and pasting, I’m still downloading from here and uploading to here. So I’d love to see this process improve,”
Manimbo noted AI has also been helping processes like this, noting that AI can itself help bolster an organization’s controls through automating routine processes and reducing dependence on manual processes.
“On this front, some of the things that have plagued us in the past is the amount of context that we need as professionals to know if something is something that needs to be addressed immediately as part of a control failure that may be detected. And I think AI will help provide that context there… It may not necessarily be [about] what the controls may be, but how efficient are the models in augmenting existing automation to find those failures in a way that we can effectively address those findings in a way that we can again improve on those and so hopefully reducing additional burden on a team members,” he said.
However, with all these different frameworks coming out, and with current ones being revised to account for AI, professionals may be challenged in keeping up with all the changes. Professionals need to not only know how to apply these frameworks but also how to scale them as time goes on. Hall said that, by maintaining a security-focused mindset and being proactive, so that the organization is more able to respond to change.
“If we build and buy with security in mind and find ways to leverage automation and AI to enable us to quickly adjust, … we’re just going to be way better off,” said Hall. “Instead of looking at ‘here’s the strict regulation, here’s what I have to do,’ [it is] kind of this afterthought, by being more proactive and just having these things in mind. .. I think it’s about us having that mindset of: How is the security built in? How can I be accountable and prove that I’m doing what I’m doing? And think about that before the auditors show up and before the regulations show up.”
The American Institute of CPAs is monitoring the situation at the Internal Revenue Service amid reports of
“In recent weeks, there has been a flood of information regarding the current state of the IRS, some of which has resulted in conflicting reports, creating confusion,” said AICPA president and CEO Mark Koziel in a statement Friday. “The AICPA is having active discussions with IRS officials to clarify this information and we are actively monitoring developments as the IRS continues to assess the immediate and long-term implications. With the volatility of the present environment and rapidly changing events, it is important to reconcile fact from fiction for taxpayers and their advisors. Despite inconsistent reports, we know that the IRS is making every effort to maintain this tax season’s service levels comparable with that of recent years.”
He stressed the importance of the IRS maintaining service during tax season.
“The ability of the IRS to maintain service levels for taxpayers and their preparers is critically important to the AICPA,” Koziel added. “IRS services in combination with modernization efforts, which include technology advancements, have been the bedrock of AICPA’s recommendations for many years. A modern, functioning IRS is essential for Americans to meet their tax obligations and to our country’s financial health.”
The AICPA is also offering recommendations to the embattled agency. “The AICPA continues to provide recommendations to the IRS that will offer some level of relief as we work diligently to understand the impacts to services offered to taxpayers and their practitioners,” said Koziel. “We offer our voice and support to minimize public confusion about current IRS operations.”
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