Author: Ada, Deep Tide TechFlow
On February 7, 2025, four young people walked into a federal office building in Washington.
They belonged to DOGE, the "Department of Government Efficiency" led by Elon Musk. Their destination was the headquarters of the CFPB (Consumer Financial Protection Bureau). This agency is responsible for regulating all digital payment products in the United States, including Apple Pay, Venmo, Cash App, and the soon-to-be-launched X Money.
According to Bloomberg, the DOGE team initially received "read-only" access. But by late Friday night, Russell Vought, Director of the White House Office of Management and Budget, sent an email demanding broader data access for DOGE. Ninety minutes later, Vought was appointed acting director of the CFPB.
By Sunday, the CFPB had been reduced to a skeleton. Funding was frozen, activities were suspended, and nearly 90% of employees faced dismissal.
And just nine days earlier, X had announced a partnership with Visa.
Nine days. From announcing their entry to dismantling the referee, it took only nine days.
The Compliance Marathon and the Nine-Day Blitz
In 2013, Coinbase registered with FinCEN as a money services business, becoming one of the first crypto companies to proactively embrace federal regulation. That year, Bitcoin was worth less than $200, and the entire industry's market capitalization wasn't enough to buy an apartment in Manhattan.
The next decade was a compliance marathon. Coinbase obtained money transmitter licenses in 49 states and territories, with surety bond requirements ranging from $1,000 to $500,000 per state and net worth thresholds from $5,000 to $2 million. Applying for New York's BitLicense was particularly grueling, requiring quarterly financial statements and annual independent audits. Coinbase's compliance architecture revolved around three core pillars: regulatory registration, operational transparency, and proactive engagement with financial regulators, covering over 100 countries.
But lawsuits still came. In 2023, the SEC sued Coinbase for "operating an unregistered securities exchange." The company was forced into a protracted legal battle. The Third Circuit Court of Appeals ruled that the SEC "failed to adequately explain why it denied the rulemaking petition," which was a partial victory. But what truly got the lawsuit dismissed was the 2024 U.S. election. Coinbase and the crypto industry's super PACs spent over $130 million aiding the campaign, with Coinbase alone contributing $75 million. In February 2025, the newly appointed acting SEC Chairman, Mark Uyeda, dropped the charges against Coinbase—unconditionally, without fines, and barred from suing on the same grounds again.
A decade of compliance, one lawsuit, $75 million in political contributions. That was the price Coinbase paid for the words "legitimate operation."
PayPal took a different path, but it was equally expensive. In August 2023, PayPal launched the stablecoin PYUSD, issued by Paxos Trust Company, regulated by the New York State Department of Financial Services. The GENIUS Act (U.S. stablecoin regulatory bill) required 100% reserve backing and monthly public attestations, which PYUSD complied with fully. Furthermore, each expansion to a new blockchain (from Ethereum to Solana to Stellar) required regulatory approval from NYDFS. In December 2025, PayPal claimed PYUSD was the "largest federally approved dollar stablecoin."
Those were the rules. To enter the U.S. financial market, you had to get permits state by state, pass inspection by regulator after regulator. Coinbase took a decade, PayPal spent hundreds of millions on compliance infrastructure.
X Payments LLC also got licenses. As of May 2025, it held money transmitter licenses in 40 states. Formally, everything was compliant.
But the gap between formal compliance and substantive regulation is not small.
On November 21, 2024, the CFPB finalized a rule subjecting large digital payment apps processing over 50 million transactions to federal supervision, the same way traditional credit cards and bank accounts are regulated. This rule directly covered X Money. Six days later, Musk posted on X: "Delete CFPB."
Three months later, DOGE entered the CFPB. Another three months later, the Senate voted to repeal the CFPB's digital payment supervision rule. On April 9, the House followed suit and passed the repeal.
Coinbase spent a decade, $75 million, and a Supreme Court-level lawsuit to prove its legitimacy within the rule framework. Musk used one tweet and nine days to dismantle the framework itself.
The Referee's Trump Card
Dismantling the regulator is outrageous enough. But the story has an even more unbelievable part.
The CFPB isn't just a "caretaker"; it holds data.
In 2021, to assess consumer protection risks in payment technology, the CFPB issued compulsory data orders to Amazon, Apple, Facebook, Google, PayPal, and Square (now Block). These companies submitted vast amounts of confidential business information, including product strategies, internal operational data, and compliance records. In the following years, the CFPB initiated investigations or enforcement actions against several of these companies, including PayPal and Cash App.
This data is still in the CFPB's databases.
And the DOGE team gained access to "all non-classified databases," including sensitive bank examination records and enforcement records. According to Bloomberg, DOGE employees began accessing systems on the same day they entered CFPB headquarters, without completing the CFPB's required privacy, cybersecurity, and ethics training.
Former CFPB Chief Legal Officer Seth Frotman testified before Congress: "He has obtained not only information about consumers but also about competitors."
Former CFPB Chief Technology Officer Erie Meyer recalled five young DOGE team members wandering the secure executive suite, trying to enter locked offices. She resigned the next day.
Think about what this means. A new player about to enter the payment market obtained the medical reports of all major competitors before even opening for business. Product strategies, operational weaknesses, regulatory issues, undisclosed enforcement information.
Representative Maxine Waters was more direct at the hearing: "In addition to obtaining consumer data on millions of Americans, Musk can now illegally steal sensitive business information from other U.S. companies in the same industry."
Legal scholar Tim Wu described this data access as "god-tier" level, constituting a "massive competitive advantage" for companies in the same competitive field.
What would happen if the founder of a crypto exchange did the same thing? The SEC would file a case, the FBI would show up, the CEO would go to jail. This isn't hypothetical; FTX's Sam Bankman-Fried was sentenced to 25 years for misusing customer funds.
The difference is: SBF committed crimes under the rules, Musk operated above them.
The Backdoor in the GENIUS Act
If dismantling the CFPB was "destruction," then the GENIUS Act is "construction." Except, this construction created a backdoor.
The GENIUS Act is the U.S. stablecoin regulatory bill signed by Trump. The bill establishes a basic framework for stablecoin issuance, including reserve requirements, information disclosure, and division of regulatory jurisdiction.
But the problem lies in one clause.
In an open letter to Musk on April 14, 2026, Senator Elizabeth Warren pointed out: The GENIUS Act contains a "questionable exemption clause" that allows private commercial companies like X to issue stablecoins without undergoing some of the approval processes and safeguards required for publicly listed commercial companies.
Warren's question was sharp: Did Musk or his agents participate in lobbying for or influencing this exemption clause? Because during the drafting and debate of the GENIUS Act, Musk was serving as a senior presidential advisor and leading DOGE.
In other words: The person about to issue a stablecoin was sitting in the rulemaker's seat when the exemption clause beneficial to his company was written into the stablecoin bill.
Compare this to PayPal's PYUSD. Issued by Paxos, fully regulated by the New York Department of Financial Services, requiring 100% reserve backing, monthly third-party audit attestations, and needing approval for each blockchain expansion. But the draft CLARITY Act considered prohibiting "yield generation on payment stablecoins," directly targeting PYUSD's 4% rewards program.
And X Money? It advertises 6% APY on deposits, with its partner bank being Cross River Bank, which was previously penalized by the FDIC. Warren asked in her letter: "In an environment where the federal funds rate is 3.5%-3.75%, what exactly will X Money and Cross River rely on to pay a 6% yield? High-risk investments, intrusive data monetization, or a gimmick?"
FDIC Chairman Travis Hill made it clear in March: Under the GENIUS Act framework, stablecoin users' deposits are not protected by FDIC insurance.
PayPal spent two years complying with the GENIUS Act, issuing monthly attestations, waiting for approval for each chain. X Money got a green channel specifically opened for it before even launching. This is unfair competition.
The Weight of Rules
In April 2026, X Money entered early public access. 600 million monthly active users, partnership with Visa, 6% APY, no federal oversight from the CFPB.
In the same month, Coinbase just received conditional approval from the OCC to prepare to establish the Coinbase National Trust Company. From registering with FinCEN in 2013 to getting the national trust company approval in 2026—a full thirteen years.
Also in April, the CLARITY Act had a 50-50 chance of passing the Senate.
The regulatory narrative of the crypto industry over the past decade can be summed up in one sentence: Give us rules, and we will comply. The premise of this sentence is that the rules apply equally to everyone.
But when someone can simultaneously create a backdoor for their own company, dismantle the enforcement agency, and use competitors' confidential data to prepare for launch, how much weight do the words "rules" still carry?
Warren's deadline for Musk's response was April 21. As of publication, Musk has not publicly responded.
And X Money has already launched.
