Trump's love affair with crypto is...complicated. After years of denouncing it, now he’s promoting it, now he’s cashing in on NFTs, now he’s taking Bitcoin donations. This time, this flip-flop is more than just political theater. It’s a massive, high-stakes gamble that could remake the future of decentralized finance (DeFi) and who it benefits.

Crypto Taxes Discourage Real Usage?

At this moment, the US crypto tax system is a disaster. Now imagine having to turn around and explain to your grandma why her staking rewards are taxed as ordinary income. She doesn’t need much, just enough to pay off her medical expenses and it seems so complex. High capital gains taxes, especially on short-term holdings, discourage everyday people from using crypto for what it was meant for: financial freedom and inclusion.

Next we’re asking for a system in which each airdrop, each yield-farming reward, is a taxable event. It’s a nuisance nightmare, it wastes taxpayer dollars, and it punishes the poor and vulnerable the most. This isn’t really about millionaires avoiding taxes, it’s about snuffing out the tremendous promise of DeFi to put power in the hands of everybody.

  • Capital Gains Tax: Up to 37% for short-term holdings
  • Mining, Staking, Airdrops: Taxed as ordinary income
  • Compliance Costs: High, especially for small investors

Think about it: DeFi offers opportunities for lending, borrowing, and earning yield outside the traditional financial system. As such, it can be a real lifeline for underbanked communities, providing access to new forms of capital and financial services that have long been out of reach. The tax burden can be a disincentive to participate because it is costly and complex. This may be a lockout for the people who could benefit the most.

Is Trump's Plan Fair or Favorable?

Eric Trump mentioned that crypto projects based in the US should be granted a tax exemption. Similar foreign projects would incur a significant 30% tax. Or is it a shrewd long-term play to encourage domestic innovation and establish a crypto ecosystem completely dominated by the US? Or is it simple protectionism dressed up in the rhetoric of “making America great again?”

This is where the unexpected connection comes in. It reminds me of the early days of the internet. The US began as the overwhelming favorite. Unfortunately, it lost that leading edge through a combination of shortsighted policy and failure to invest in digital literacy across the board. Are we on the verge of making the same error again, but this time with DeFi?

At the end of the day, only time will tell if Trump’s crypto tax gamble will result in a DeFi ecosystem that better serves the needs of Americans. Or will it just go to line the pockets of everyone’s favorite billionaire class while failing to deliver for the rest of us?

  • Attract Innovation: Tax breaks could lure crypto startups and talent to the US.
  • Boost US Economy: A thriving domestic crypto industry could create jobs and wealth.
  • Global Leadership: The US could become a leader in DeFi innovation.

The answer, I would argue, is in our regulation. It’s all about finding the right balance. We should have strong, transparent rules that protect consumers while still promoting innovation. To realize DeFi’s full potential we have to make sure that these new services are available to people of all income levels and technical know-how. We need to address the inherent risks of DeFi, such as volatility and fraud, in a way that doesn't disproportionately harm vulnerable users.

  • Unfair Competition: Favoring US projects could stifle global innovation.
  • Rent-Seeking Behavior: Tax breaks could incentivize companies to prioritize lobbying over innovation.
  • Increased Speculation: Lower taxes could fuel speculative bubbles, harming ordinary investors.

Is Socially Responsible DeFi Possible?

Perhaps the most important thing is education. We need to empower people with the knowledge and skills they need to navigate the world of DeFi safely and effectively. As an educator, I teach investors about crypto investing’s risks and rewards. I further demonstrate ways to safeguard their valuable digital assets and how to spot a scam.

Trump's actions have opened a door. Whether that door leads to a future where DeFi truly serves the people, or just another playground for the wealthy, depends on the choices we make now. Let's not waste this opportunity. Now is the time to push for something better — a DeFi ecosystem built on the right principles of fairness, inclusion and real decentralization. The future of finance depends on it.

Perhaps the most important thing is education. We need to empower people with the knowledge and skills they need to navigate the world of DeFi safely and effectively. This includes teaching them about the risks and rewards of crypto investing, how to protect their digital assets, and how to identify scams.

Trump's actions have opened a door. Whether that door leads to a future where DeFi truly serves the people, or just another playground for the wealthy, depends on the choices we make now. Let's not waste this opportunity. It's time to demand a DeFi ecosystem that is fair, inclusive, and truly decentralized. The future of finance depends on it.