In summary
- Donald Trump’s controversial Cryptocurrency project World Liberty Financial, which recently raised $14 million in an initial token sale, plans to create and issue its own stablecoin.
- The stablecoin, a type of cryptocurrency designed to maintain a stable value, is still in development and could take a while to launch.
- The World Liberty team is simultaneously working on important components of the project, including the stablecoin, to ensure those features are ready to launch at the right time.
Donald Trump’s controversial cryptocurrency project World Liberty Financial, which recently raised $14 million in an initial token sale, has plans to create and issue its own stablecoin, sources familiar with the matter told Decrypt.
The stablecoin, a type of cryptocurrency designed to maintain a stable value that is often pegged to the US dollar, is still in development and could take a while to launch. The World Liberty team is still determining how to make the financial product safe before bringing it to market, a source said.
Meanwhile, the team is simultaneously working on important project components for World Liberty Financial, including the stablecoin, to ensure those features are ready to launch at the right time, another source said.
Recent moves by World Liberty foreshadowed a possible stablecoin venture. Earlier this month, the project announced that Rich Teo, co-founder of stablecoin issuer Paxos, will serve as World Liberty’s head of stablecoins and payments.
Teo did not respond to Decrypt’s request for comment on this story. Representatives for World Liberty Financial declined to comment.
While World Liberty has already attracted attention — and controversy — for its plans to launch an Ethereum-based lending and lending platform directly associated with the former—and potentially future—president, the prospect of Trump and his business partners issuing their own stablecoin would likely carry both considerably elevated risks and the opportunity for even greater rewards.
Stablecoins are a crucial element of the crypto ecosystem. They allow cryptocurrency traders to park their funds in digital assets designed to stay fixed on a price, even when the cryptocurrency market fluctuates. They also function as equivalents to the dollar in markets where dollars are restricted or inaccessible, serving as key entry and exit points between crypto and traditional financial markets.
To stay true to their name, stablecoins must be heavily backed. Leading US-based stablecoin issuer Circle says it currently holds $34.59 billion worth of dollar-denominated assets in regulated US financial institutions to back the $34.37 billion of its stablecoin, USDC, currently in circulation.
Other stablecoin projects have attempted to evade such fiat collateralization methods, often using cryptocurrencies as backup. Notably, cryptocurrency company Terra attempted to peg its UST stablecoin to the US dollar with an algorithm linked to another internal cryptocurrency token. The scheme worked for more than a year, until the price of UST collapsed to zero in May 2022, erasing some $60 billion in value and devastating the broader cryptocurrency market.
The legality of stablecoins remains controversial in the United States. The United States Securities and Exchange Commission (SEC) has previously sued companies such as Binance for issuing stablecoins, alleging that the tokens constitute illegal and unregistered securities offerings. However, those stablecoin-related allegations against Binance were dismissed by a federal judge earlier this summer.
Several prominent federal lawmakers have signaled their intention to vote on stablecoin-related legislation in the coming year, which could lead to the surprising scenario in which Trump, if re-elected, would control the White House while Congress determines the legality of a financial product that its business partners intend to offer.
For all that potential legal and regulatory fighting, stablecoins could offer the World Liberty team huge profits. Like banks, stablecoin issuers make profits by reinvesting customer deposits in yield-generating products like US Treasuries. Tether, the company behind the market’s leading stablecoin, USDT, reported a record of $5.2 billion in profits in the first half of 2024 alone. The British Virgin Islands-based company currently holds nearly $81 billion in Treasury bonds.
The revenue generated by stablecoins could help fuel World Liberty’s future plans, but issuing a new stablecoin in an already crowded field is no easy task. Such a venture would require negotiating deals with the industry’s leading cryptocurrency exchanges, such as Coinbase and Binance, to make the asset available to a broad user base. Binance currently has a “strategic business partnership” with First Digital Labs, issuer of the fifth-largest stablecoin by market cap, FDUSD. Coinbase co-issues USDC, the second largest, along with Circle.
However, if Trump were re-elected, he would gain an exceptionally powerful negotiating position with those exchanges: Binance and Coinbase are currently the targets of long-running SEC lawsuits that threaten their ability to operate.
Trump also has connections to the world’s leading stablecoin issuer. Tether relies on Wall Street asset manager Cantor Fitzgerald to custody “many, many” of its assets in reserve, according to Cantor CEO Howard Lutnick. Lutnick currently co-chairs Trump’s transition team.
Carrying out a collateralized stablecoin would also require a large amount of capital. World Liberty Financial, which launched sales of a governance token earlier this month, has so far only managed to sell $14.24 million worth of tokens, according to data from Dune. That represents just 4.7% of the $300 million in tokens that the project had earmarked for public sale.
However, World Liberty Financial plans to leverage the Trump brand to position itself as the preferred service for retail investors looking to enter the often opaque world of cryptocurrency and DeFi trading. The project previously framed its mission to “make cryptocurrencies and America great again by driving mass adoption of stablecoins and decentralized finance.”
Although Trump and his crypto allies have enthusiastically defended the benefits of stablecoins in recent months, they have also criticized the dangers of a US central bank digital currency (CBDC) – essentially, a stablecoin issued by the US government. The former president has repeatedly promised to ban the creation of a CBDC if he is re-elected.
“A currency like that would give the federal government, our government, absolute control over your money,” Trump said during a campaign event in New Hampshire earlier this year.
“They could take your money,” he added. “You wouldn’t even know he was gone.”
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