Trump's Meme Coin Stunt Raises Questions About His Crypto Advocacy

President Donald Trump campaigned on becoming the cryptocurrency industry's biggest advocate in the White House, but now some crypto supporters are questioning that claim

President Donald Trump campaigned on becoming the cryptocurrency industry's biggest advocate in the White House, but now some crypto supporters are questioning that claim after he created what is called a meme coin days before Inauguration Day.

Going all in on such a dodgy element of the crypto universe, some in big crypto supporters say, does not bode well for the industry. It began when Trump and First Lady Melania Trump rolled out a pair of memes coins they dubbed $TRUMP and $MELANIA. Both digital coins are a type of cryptocurrency that serves no purpose, cannot be exchanged for physical products, and whose value depends almost entirely on how long they can capture the attention of people who buy into the internet meme.

Even so, the market cap for the president's token climbed to $8 billion yesterday afternoon, while the First Lady's coin was pegged at about $710 million. It took most companies on the S&P 500 several years to reach multibillion dollar valuations.

Popular memes such as Dogecoin, whose mascot is a dog, and Fartcoin start as a joke with no real value but can surge in price if enough fans and unsophisticated investors buy them. Dogecoin is billionaire Elon Musk's preferred memecoin. The project he heads that's intended to help cull down government spending is called the Department of Government Efficiency -- or Doge.

Such coins are prone to pump and dump scams, where the creators of the coin drive up the price before dumping them on people who are not on the inside of the grift.

Trump played coy when asked about the launch.

Some in the cryptocurrency world are not happy with the decision, which came days before Trump took office.

“Now, on the cusp of getting some liberalization of crypto regulations in this country, the main thing people are thinking about crypto is, 'Oh, it’s just a casino for these meme coins,'” Nic Carter, a Trump supporter and partner at the crypto investment firm Castle Island Ventures, told ABC News. “It does the opposite of validating us, it makes it look completely unserious.”

The president ran on bringing regulatory clarity to digital coins. Trump signed an executive order on Thursday that sets up a crypto working group, which, among other things, is intended to evaluate the possible creation of a national digital asset stockpile.

Despite the moves, others in the industry shared Carter's opinion.

"I really was kind of bummed out when I saw it,” Tom Schmidt, a partner at a crypto venture capital firm Dragonfly, told ABC. “It just felt very grifty and cheap.”

Carter and Schmidt's comments come after the industry worked for months to rehabilitate the public image of digital coins, which had become synonymous with Sam Bankman-Fried, the founder of failed crypto-exchange FTX. SBF -- as he is called -- was sentenced to 25 years in prison and ordered to forfeit $11 billion last year after being convicted of seven counts of fraud, conspiracy, and money laundering.

His trial was one of the most notorious cases of white-collar crime in the U.S., with some financiers calling SBF the Bernie Madoff of crypto, a reference to the man who was convicted of running the largest Ponzi scheme in world history.

But now that the president of the United States is getting involved in the shadier side of the industry, all bets are off, according to Stephen Findeisen, better known as Coffeezilla on Twitter and YouTube.

Thursday's executive order refers to Trump's campaign promise of a so-called Bitcoin Strategic Reserve, a name coined after the Strategic Petroleum Reserve (SPR), which is a government-controlled stockpile of oil located in underground tanks in Louisiana and Texas.

Some industry insiders warn the idea might sound good, but it carries substantial risk for crypto supporters.

"Be careful what you wish for," Austin Campbell, CEO of global digital payments company WSPN, said on a recent Odd Lots podcast. He was referring to the reserve idea, which he claims could lead to the government tampering with the supply of Bitcoin.

Much of the industry has historically been sold as a way of creating a digital currency that falls outside the government purview, Like the SPR, the U.S. government might find a justification for interfering with the technology used to mine cryptocurrencies, Campbell warns.

"If you're telling them it's strategic, be careful because they may actually agree with you and then start doing these things," he said, referring to possible drone strikes targeting foreign crypto miners.

Going that route could prompt the industry to lose value and become another element of government-denominated currency, Campbell added.