Trump-backed 'Truth Social Coin ETF' Abruptly Withdrawn: Did it Yield to Conflict of Interest Pressure?

▲ Donald Trump, Trump Coin (TRUMP)/AI generated image ©

The plan to launch a cryptocurrency Exchange Traded Fund (ETF) under the brand of Truth Social, a social media platform sponsored by former U.S. President Donald Trump, has been abruptly withdrawn. This has simultaneously brought attention to the conflict of interest controversy surrounding the White House and the underlying reasons for a cooling asset market.

According to investment media FXStreet on May 20 (local time), asset management firm Yorkville America requested the mass withdrawal of Truth Social-related cryptocurrency ETF applications it had submitted to the U.S. Securities and Exchange Commission (SEC), citing a change in product strategy. The withdrawn products include the Truth Social Bitcoin ETF, products combining Bitcoin and Ethereum, and the Crypto Blue Chip ETF. Experts stated that Yorkville America is pursuing a transition from a 1933 Securities Act-based structure focused on spot products to a 1940 Investment Company Act structure with enhanced investor protection and tax benefits.

Yorkville America, well-known for its "America First"-themed financial products, is a key partner of Trump Media & Technology Group (TMTG), Truth Social's parent company, serving as both a financier and asset manager. This withdrawal decision comes amid ongoing concerns that Trump's close ties to the cryptocurrency industry and his personal financial interests could conflict with his public duties as president. Democratic senators, in particular, have been strongly pressing to understand Trump's role in specific cryptocurrency platforms, such as World Liberty Financial, since he took office last January.

Furthermore, the overall correction in the cryptocurrency market this year, leading to a general decline in market demand for related ETFs, is also believed to have influenced this decision. Indeed, the net inflow for U.S. Bitcoin (BTC) spot ETFs this year stands at only $790 million as of Tuesday, with most of this concentrated in BlackRock's iShares Bitcoin Trust ETF (IBIT), significantly lagging last year's momentum when a whopping $25 billion flowed in. Ethereum (ETH) spot ETFs are also experiencing a net outflow of $640 million due to investor disinterest, and other newly launched altcoin ETFs are also failing to gain initial traction.

Experts, including Bloomberg ETF specialist analyst James Seyffart, analyzed that the fierce competitive landscape of the Bitcoin ETF market is behind Yorkville America's withdrawal. In particular, the recent launch of Morgan Stanley's Bitcoin Trust ETF with a market-low fee of 0.14% has further raised the entry barrier for latecomers. Originally, this ETF launch framework was part of a comprehensive cryptocurrency strategy envisioned by TMTG when it launched its financial platform, Truth.fi, last year.

Consequently, it remains uncertain whether Yorkville America will pursue cryptocurrency ETFs again under the 1940 Act framework in the future. As this company, which specializes in managing traditional U.S. national interest themed funds spanning defense, security, energy, technology, and real estate, shifts to a strictly regulated diversified investment strategy, plans to expand its digital asset market footprint, prominently featuring the Trump brand, are expected to be halted for the time being.

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