The growing bipartisan embrace of cryptocurrency in Washington, especially stablecoins, is setting the stage for America’s next financial crisis — and potentially an even deeper political one — according to Rana Foroohar in a scathing Financial Times op-ed titled “The Coming Crypto Crisis.”
With JPMorgan Chase now exploring crypto-backed loans, and Congress recently passing the “Genius Act” with support from both major parties, crypto has officially broken into the mainstream financial system — a development Foroohar argues is dangerously premature and reminiscent of the deregulation disasters that led to the 2008 meltdown.
“Bitcoin is a speculative, high-volatility asset with ties to criminal activity,” she writes, warning that it is now being legitimized thanks to heavy political donations from crypto PACs. Those groups have poured tens of millions into campaigns, capturing allies across the aisle — including influential Democrats like Senators Mark Warner and Kirsten Gillibrand.
Foroohar traces a troubling throughline from the Clinton-era deregulation of derivatives in 2000 to the weakening of post-crisis Dodd-Frank reforms in 2018 — both of which helped trigger major economic fallout — to today’s bipartisan crypto push. The Genius Act, she warns, is being sold as a safety measure by requiring stablecoins to be backed 1:1 by U.S. dollars, but it doesn’t neutralize the broader risks of volatile digital assets.
Four Alarms:
- False Safety Net: Stablecoins might appear safe, but they’re built on an ecosystem that’s fundamentally unstable. Assets like Bitcoin, which have a 3-year beta of 2.6 to the S&P 500, are far more volatile than the broader market — meaning they rise and fall even harder.
- Timing is Terrible: With inflation still a threat and interest rates under pressure, incentivizing new forms of “financial innovation” could make markets more fragile, not less. If rates rise quickly, crypto markets — and any institutions holding digital assets — could crash.
- Systemic Risk: In a crisis, crypto firms might need to dump U.S. Treasury bonds to cover redemptions, causing a fire-sale spiral that could raise borrowing costs and trigger broader financial contagion — this time with ordinary Americans once again left holding the bag.
- Political Fallout: Foroohar sees this as the most dangerous consequence. Just as the 2008 crash fed political cynicism and helped fuel Donald Trump’s rise, another meltdown rooted in bipartisan failure could deepen voter disillusionment and destabilize U.S. democracy further.
She warns that Trump — a crypto supporter and investor — is laying the groundwork for both financial and political chaos, at a time when the government may be too weakened to mount an effective response.
