Digital gold rush: Does Donald Trump’s pledge to rule the crypto world mean it’s the end of ‘real’ money?

It’s 2014 and millions of Scots head to the polling station to decide on the future of Scotland, but one Edinburgh-based entrepreneur, Derek Nisbet, is looking beyond the referendum result.

Worried about the country’s uncertain future, Nesbit has come up with a solution for a stable post-referendum economy – cryptocurrency.

His brainchild Scotcoin is designed to help the transition between Sterling and a future Scottish currency. However, when 45 per cent of the country vote against independence, his project gradually becomes too ambitious to handle.

In 2016, left as “just a one-man band”, businessmen Temple Melville and David Low “bought him [Nesbit] out”, Melville tells Holyrood.

Renamed the Scotcoin Project, the token shifted away from its initial use to become an ‘ethical cryptocurrency’, used to buy clothes which are going to waste.

This move reflects just one of the many lesser-known uses of crypto, which was first introduced by Bitcoin in 2009 as a tool to make finance more transparent. Think of it as a digital alternative to traditional finance that is not tied to any central authority. Powered by a technology called blockchain, crypto operates in a decentralised way. Transactions are recorded on a digital ledger which acts like an open notebook that everyone on the network can see.

Yet despite its initial promise of financial freedom and security, it has struggled to shake off what is known as the ‘crypto bro’ culture, fuelled by leaked pictures from champagne-soaked parties that smack of a toxic masculinity, keeping many away from it.

“Unfortunately, that’s one of the things that I think is very wrong about crypto. That it is this sort of get-rich-quick idea,” Melville says.

However, 2024 marked a pivotal year for the sector, as it saw leaders across the world take a more positive stance on it – most notably recently re-elected US president Donald Trump.

Three years after saying cryptocurrencies were a “scam”, Trump changed his tune when, during his presidential campaign, he said he wanted to make the US the “crypto capital of the planet” and promised a more regulatory-friendly approach towards the sector.

His landslide victory in November can largely be attributed to his promise to put money in people’s pockets, and it’s within this context that crypto made its mark. A poll by market research firm Harris Poll revealed a third of US voters considered a political candidate’s position on cryptocurrencies before deciding who to vote for. Since November, Bitcoin’s value has risen by more than 50 per cent.

Politicians shouldn't understimate it

With less than two years until the next Holyrood election, experts predict that crypto might have a similar impact on results here and suggest that politicians need to get up to speed. “Politicians and civil servants don’t really understand what crypto is about at all. And it’s much easier from their point of view to simply ignore it”, Melville explains to Holyrood. A few years ago the Scotcoin team sent a letter to the Scottish Government outlining the opportunities the token had to offer. After being told to contact civil servants, the proposal was met with strong opposition, as Melville explains: “They were worried that if the company gave away sums of money, those on benefits could have their benefit tainted in some way.”

However, he insists the issue was quite “straightforward” to solve by imposing a limit on the money people could earn. The proposal never “moved much beyond” that stage.

Daniel Taylor, research and policy lead at digital assets firm Zumo, says: “Politicians shouldn’t underestimate it. They perhaps don’t appreciate the kind of public sentiment, particularly among the younger generations, towards doing things differently, towards alternative systems of finance and organisation.

“They don’t see the financial opportunities they want and expect, and so it’s natural that crypto is kind of an escape valve in that sort of environment.”

Research by Zumo ahead of the general election showed more than a third of 18 to 34-year-olds believed that crypto should be front of mind for the country’s politicians.

However, as the US is expected to adopt a more laissez-faire approach towards the industry, the UK is still caught in a regulatory enigma.

​In 2023, the Treasury Committee called for a “balanced approach” to support crypto assets with clear use cases, highlighting their benefits for cross-border payments, an area the UK has struggled with post-Brexit, as UK-EU payments are now slower and not protected from reductions. The committee argued that crypto could improve payment efficiency and reduce costs as it bypassed traditional banking hours and middlemen.

You have to pick your poison... it really is a trade-off, and it’s kind of a question of what’s prioritised.

However, driven by factors like market sentiment and speculative trading, crypto can dramatically change based on news or media trends as investors’ reaction to changing conditions can lead to sharp price fluctuations. The market suffered its most significant crash six years ago. After a boom in 2017, Bitcoin’s value fell by more than 65 per cent during the first month of 2018 following a massive sell-off by investors who realised that the quick profits they had hoped for were not materialising. Yet it is also its ability to quickly change in value which made initial Bitcoin buyers into millionaires. Earlier this month James Howell from Wales lost his bid to recover a Bitcoin hard drive which he said was now worth around £600m from a landfill site. His former partner mistakenly threw away the digital wallet more than a decade ago and, after years of trying to get into the rubbish pit where he claims the drive is located, a High Court judge ruled out his attempt to sue the local authority to gain access to the site or get £495m in compensation, saying there were no “reasonable grounds” for bringing the claim.

In its recommendation to the UK Government the Treasury Committee acknowledged the volatile nature of crypto and called for investments in unbacked crypto assets to be regulated as gambling,

The panel feared treating it as a financial service could mislead consumers into thinking it’s safer than it is. The Treasury disagreed, arguing that this could conflict with international regulations.

It wasn’t until last September that the UK Government clarified crypto’s legal status by introducing the Property (Digital Assets) Bill, which, if passed, would recognise cryptocurrencies as personal property. A similar bill is being considered for Scotland.

“It’s a bit hard to put it in black and white because stricter regulation attracts the really big business that relies on regulation and assurance of a clear operating environment, whereas the freer jurisdictions will attract the kind of activity that’s more around startups [like] agility, disruption, innovation,” Taylor says.

“You have to pick your poison,” Taylor adds. “Either you have a system that is entirely permissionless but you use at your own risk, which is essentially what decentralised finance is, or you have the safeguards that you have available in existing finance… So, it really is a trade-off, and it’s kind of a question of what’s prioritised.”

On a global scale, much like Nesbit’s original vision for Scotcoin as an economic bridge, cryptocurrencies could help achieve economic equality. It is argued that digital currencies offer an opportunity for developing nations to bypass traditional systems, helping to level the playing field for countries that have been excluded from the global economic conversation.

In 2021, El Salvador became the first country in the world to accept Bitcoin as a legal tender in a move aimed at helping to support the country’s economy. Although it recently struck a £1.1bn loan deal with the International Monetary Fund to scale back its efforts to encourage Bitcoin use, it still intends to grow its crypto reserve which, according to a post on Facebook by its president Nayib Bukele, had risen to $632m in November – equivalent to £504m.

Whether crypto will fall victim to its own volatility remains uncertain, but as it reshapes global finance the critical question remains: will crypto create a fairer global economy, or will nations that adopt it first dominate the financial landscape, leaving the rest to play catch-up?