The Night Before X Money Launches, Musk Dismantles the Referee First
- Core Thesis: This article reveals that the U.S. digital payment and crypto regulatory system is experiencing an unprecedented imbalance: Through political and administrative means, Elon Musk dismantled the CFPB, the federal agency responsible for regulating his competitors and the potential market for X Money, in just nine days. He may have also gained an unfair competitive advantage by accessing the agency's confidential data, while compliant companies must spend a decade and hundreds of millions of dollars to follow the same set of rules.
- Key Elements:
- In February 2025, Musk’s DOGE team entered the CFPB and gained access to all non-confidential databases, including competitors' commercial and regulatory data. Subsequently, the CFPB’s funds were frozen, its activities suspended, and nearly 90% of its employees were laid off.
- In April 2025, both the House and Senate voted to repeal the CFPB's federal regulatory rules for large digital payment applications, rules that would have originally covered X Money.
- Just nine days prior (end of January 2025), X announced a partnership with Visa to prepare for the launch of X Money, and the CFPB was swiftly dismantled.
- Comparison case: It took Coinbase ten years, $75 million in political donations, and an SEC lawsuit to obtain its legal operating status.
- The GENIUS Act contains a suspicious exemption clause that would allow X to issue stablecoins without the stringent approval process required of publicly listed companies, whereas PayPal's PYUSD requires 100% reserves and monthly audits.
- The FDIC has clarified that under the GENIUS Act, stablecoin user deposits are not protected by FDIC insurance. X Money claims a 6% APY, but its partner bank has been penalized, raising questions about its sustainability.
- A former Chief Legal Officer of the CFPB pointed out that Musk not only obtained consumer data but also sensitive commercial information of all major competitors, constituting a "significant competitive advantage."
Original Author: Ada, TechFlow by Shenchao
On February 7, 2025, four young men walked into a federal office building in Washington D.C.
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 oversees all digital payment products in the United States, including Apple Pay, Venmo, Cash App, and the upcoming X Money.
According to Bloomberg, the DOGE team initially received "read-only" access. But by late Friday night, Russell Vought, Director of the 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 become a hollow shell. Funds were frozen, activities suspended, and nearly 90% of employees faced layoffs.
Just nine days earlier, X had announced its partnership with Visa.
Nine days. From announcing entry into the game to dismantling the referee, it took only nine days.
The Compliance Marathon vs. The Nine-Day Blitzkrieg
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 cap couldn't buy a Manhattan apartment.
The following decade was a compliance marathon. Coinbase obtained money transmission licenses in 49 states and territories, with 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 reports and annual independent audits. Coinbase's compliance framework was built on three core pillars: regulatory registration, operational transparency, and proactive engagement with financial regulators, covering over 100 countries.
But the lawsuit still came. In 2023, the SEC sued Coinbase for operating as 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 its reasoning for denying the rulemaking petition," which was a half-victory. However, what truly led to the dismissal of the lawsuit was the 2024 U.S. election. Coinbase and the crypto industry's super PAC spent over $130 million on campaigns, with Coinbase alone contributing $75 million. In February 2025, newly appointed SEC Acting Chair Mark Uyeda dropped the case against Coinbase—unconditionally, with no fines, and barred from re-filing on the same grounds.
A decade of compliance, one lawsuit, $75 million in political donations. That was the price Coinbase paid for the stamp of "legal operation."
PayPal took a different path, but it was equally costly. In August 2023, PayPal launched its stablecoin PYUSD, issued by Paxos Trust Company, which is regulated by the New York State Department of Financial Services (NYDFS). PYUSD fully complied with the GENIUS Act's requirements for 100% reserve backing and monthly public attestations. Moreover, every 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 dollar-backed stablecoin with federal approval."
That's how the rules were set. To enter the U.S. financial market, you had to obtain licenses state by state and pass muster with one regulatory agency after another. Coinbase took a decade; PayPal spent hundreds of millions of dollars on its compliance infrastructure.
X Payments LLC also got licenses. As of May 2025, it held money transmitter licenses in 40 states. On the surface, everything was compliant.
But the gap between formal compliance and substantive regulation is vast.
On November 21, 2024, the CFPB finalized a rule to subject large digital payment apps processing over 50 million transactions to federal oversight, similar to how traditional credit cards and bank accounts are regulated. This rule directly targeted 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 oversight rule. On April 9th, the House followed suit.
Coinbase spent a decade, $75 million, and a Supreme Court-level legal battle to prove its legitimacy within the rulebook. Musk, with one tweet and nine days, dismantled the rulebook itself.
The Cards Held by the Referee
Dismantling the regulator was already outrageous. But the story gets even more surreal.
The CFPB wasn't just a "watchdog"; it held 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 massive amounts of confidential business information, including product strategies, internal operational data, and compliance records. In subsequent years, the CFPB launched investigations or enforcement actions against several of these companies, including PayPal and Cash App.
That data is still in the CFPB's database.
And the DOGE team gained access to "all non-classified databases," including sensitive bank examination records and law enforcement records. According to Bloomberg, DOGE staff began accessing systems on the same day they entered CFPB headquarters, without having completed the privacy, cybersecurity, and ethics training required by the CFPB.
Seth Frotman, former CFPB General Counsel, testified before Congress: "He didn't just get information about consumers; he got information about competitors."
Erie Meyer, former CFPB Chief Technology Officer, 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 got the medical reports of all its major competitors before even launching. Product strategies, operational weaknesses, regulatory issues, undisclosed enforcement information.
Representative Maxine Waters put it even more bluntly during a hearing: "In addition to accessing the consumer data of millions of Americans, Musk can now illegally steal sensitive commercial information from other competing U.S. companies."
Legal scholar Tim Wu described this level of data access as "god-tier," arguing it constitutes a "massive competitive advantage" over companies in the same field.
What would happen if a crypto exchange founder did the same thing? SEC investigation, FBI raid, CEO goes to prison. This isn't hypothetical. FTX's Sam Bankman-Fried was sentenced to 25 years for misappropriating customer funds.
The difference is: SBF operated outside the rules, while Musk operates above them.
The Backdoor in the GENIUS Act
If dismantling the CFPB was the "destruction," then the GENIUS Act was the "construction." However, this construction built a backdoor.
The GENIUS Act is the U.S. stablecoin regulatory bill signed by Trump. It establishes a basic framework for stablecoin issuance, including reserve requirements, disclosure rules, and regulatory jurisdiction.
But the problem lies in one specific clause.
In an open letter to Musk on April 14, 2026, Senator Elizabeth Warren pointed out: The GENIUS Act contains a "suspicious exemption clause" that allows private commercial companies like X to issue stablecoins without undergoing some of the approval processes and safeguards required of publicly traded commercial companies.
Warren's question was pointed: Did Musk or his agents participate in lobbying or influencing this exemption clause? Because during the drafting and debate of the GENIUS Act, Musk was serving as a Senior Advisor to the President while also leading DOGE.
In other words: A person about to issue a stablecoin sat in the rulemaker's seat while a stablecoin bill was written with an exemption clause favorable to himself.
Compare this with PayPal's PYUSD. Issued by Paxos, fully regulated by NYDFS, requiring 100% reserve backing, monthly third-party audit attestations, and approval for each blockchain expansion. Meanwhile, a draft of the CLARITY Act considered banning "payment stablecoins" from generating yield, directly targeting PYUSD's 4% rewards program.
And X Money? It offers 6% APY on deposits, partnering with Cross River Bank, which has been penalized by the FDIC. Warren questioned in her letter: "In an environment where the federal funds rate is 3.5%-3.75%, how exactly will X Money and Cross River pay a 6% yield? Is it through high-risk investments, intrusive data monetization, or is it a gimmick?"
FDIC Chairman Travis Hill had already stated clearly in March: Under the GENIUS Act framework, stablecoin user deposits are not protected by FDIC insurance.
PayPal spent two years complying with the GENIUS Act, issuing monthly attestations, and waiting for approval on every chain. X Money received a special green lane built just 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, a partnership with Visa, 6% APY, and no federal oversight from the CFPB.
In that same month, Coinbase finally received conditional approval from the OCC to establish Coinbase National Trust Company. From its FinCEN registration in 2013 to obtaining the national trust charter in 2026—a full thirteen years.
Also in April, the probability of the CLARITY Act passing the Senate was 50-50.
The crypto industry's regulatory narrative over the past decade can be summed up in one sentence: Give us rules, and we will follow them. The premise of this sentence is that the rules apply equally to everyone.
But when someone can simultaneously build a backdoor for their own company, dismantle the enforcement agency, and prepare for launch armed with competitors' confidential data, how much weight is left in the word "rules"?
Warren's deadline for Musk's response was April 21st. As of this writing, Musk has not publicly responded.
And X Money is already live.
