Trump Media to launch cryptocurrency exchange-traded fund. Is there a conflict of interest here?

Donald Trump's company, which owns the social network Truth Social, has applied to create a fund that will invest in bitcoin and ether. In this way, it is accelerating its push into digital assets, notes Bloomberg. Opponents of this decision reproach Trump for being unethical, as he can simultaneously influence and profit from the crypto industry.

The application for a new fund called Truth Social Bitcoin and Ethereum ETF was disclosed on Monday in documents filed with the U.S. Securities and Exchange Commission (SEC). Trump Media & Technology Group, which owns social network Truth Social, said it wants to offer investors a «convenient and cost-effective» alternative to using p2p platforms such as Binance, LocalBitcoins, and Paxful, reports Bloomberg.

This is the second application to launch a cryptocurrency ETF from Trump Media in less than two weeks, Reuters notes. If the SEC approves both funds - Truth Social Bitcoin ETF and Truth Social Bitcoin & Ethereum ETF - they will enter a saturated and competitive market dominated by large management companies, the agency recalls, for example, the iShares Bitcoin ETF fund from BlackRock, which manages $72.5 billion in assets.

«Any new entrant into this market is in for a big challenge. The only way to stand out is through commissions or a recognizable brand,» said Brian Armer, an ETF analyst at Morningstar, told Reuters. The Trump Media exchange-traded fund filings do not specify commission amounts. Similar products typically have them at around 0.12%, points out Reuters.

«There is little fundamentally new in this new project [bitcoin and ether ETFs] - except for the marketing,» says CF Benchmarks CEO Sui Chun. - «Given Truth Social's involvement, it's possible that these [funds] will be promoted directly to retail investors and generate interest - similar to the way iPhone fans buy Apple stock.

In trading on Monday, the securities of Truth Social's owner fell 4.1% to $18.7. They have lost 44% of their value since the beginning of the year.

When Trump Media announced plans to raise $2.5 billion to buy bitcoins in May, its stock price plummeted 10%. The company said it would use the proceeds to create a so-called bitcoin treasury.

Trump's increased crypto activity has drawn criticism from ethics experts, Bloomberg writes. They point to a potential conflict of interest, as Trump can benefit financially in areas where he simultaneously shapes policy.

During his election campaign, Trump made cryptocurrency one of the key themes of his program. He promised to turn the US into the «crypto capital» of the world, to ease regulation in the industry and to create a strategic bitcoin reserve. The Trump family is also involved in a number of crypto projects, including World Liberty Financial's $TRUMP and $MELANIA cryptocurrency and memcoin investment platform, launched before the election results were announced.

The incumbent U.S. president has a financial interest in the success of funds that are linked to his brand and his policies, built on strategies he can influence from the White House, Michael Posner, a professor of ethics and finance at New York University's Stern School of Business, explained to Bloomberg.  «These transactions are contrary to government ethical standards. When you're president, you're expected to devote 100 percent of your energy to serving the country, not monetizing your public platform,» Posner said.» said Posner.

The White House says Trump is removed from running the business: he transferred about $4 billion worth of Trump Media stock to a trust controlled by Donald Trump Jr.

Cryptocurrency exchange-traded funds have been in high demand lately. For example, iShares Bitcoin Trust has attracted $12.5 billion in net inflows since the beginning of the year, and for 2024 the amount of inflows, according to CoinTelegraph data, amounted to $37 billion.

Ether-focused products are also doing well, with two funds - the iShares Ethereum Trust ETF and 2x Ether ETF - raising more than $2 billion this year and ranking second and third in terms of funds raised among all crypto-ETFs in the U.S., according to data compiled by Bloomberg.