Sources say that Trump's crypto project "World Liberty" plans to issue a stablecoin
Reportedly, Trump's crypto project plans to launch a native stablecoin, which could raise legal and ethical issues, but also potentially generate huge profits.
According to sources who spoke to Decrypt, Donald Trump's controversial crypto project World Liberty Financial recently raised $14 million through an initial token sale and plans to create and issue its own stablecoin.
The stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to the US dollar, and is still in development, which may take some time before it is launched. According to one source, the World Liberty team is still studying how to ensure the security of this financial product before bringing it to market.
Meanwhile, another source revealed that the team is simultaneously advancing multiple key components of the World Liberty Financial project, including the stablecoin, to ensure these functionalities can be launched at the appropriate time.
World Liberty's recent moves also hint at a potential stablecoin plan. Earlier this month, the project announced that Rich Teo, co-founder of stablecoin issuer Paxos, will serve as World Liberty's stablecoin and payments lead.
Teo did not respond to Decrypt's request for comment on this news. A representative of World Liberty Financial declined to comment.
Although World Liberty has drawn attention and controversy for planning to launch an Ethereum-based lending platform directly tied to the former president (and potential future president), Trump and his business partners issuing their own stablecoin could pose even greater risks, while also presenting lucrative opportunities.
Stablecoins are an important component of the crypto ecosystem. They allow crypto traders to park their funds in digital assets with stable prices, even when the crypto market is volatile. Stablecoins also serve as a dollar substitute in markets where the dollar is restricted or unavailable, providing a crucial on-ramp between the crypto and traditional financial markets.
To maintain the essence of a stablecoin, it must have a high degree of collateral backing. Leading US stablecoin issuer Circle says it currently holds $34.59 billion in US dollar assets at regulated US financial institutions to back the $34.37 billion USDC stablecoin in circulation.
Other stablecoin projects have tried to avoid this fiat collateral approach, often opting to use cryptocurrencies as backing. The most notable is crypto company Terra, which attempted to peg its UST stablecoin to the dollar using an algorithm tied to another of its internal cryptocurrencies. This strategy lasted over a year until the UST price crashed to zero in May 2022, causing around $60 billion in losses and severely impacting the entire crypto market.
The legality of stablecoins remains controversial in the US. The SEC has sued companies like Binance for issuing stablecoins, claiming these tokens are illegal, unregistered securities. However, in early summer this year, a federal judge dismissed these stablecoin-related charges against Binance.
Several prominent federal lawmakers have indicated plans to vote on stablecoin legislation next year - which could create a unique scenario: if Trump is elected again, he will control the White House, while Congress decides the legality of the financial products being launched by his business partners.
Despite potential legal and regulatory hurdles, stablecoins could still generate massive profits for the World Liberty team. Similar to how banks operate, stablecoin issuers can earn income by reinvesting customer deposits into yield-generating assets like government bonds. The leading stablecoin USDT's parent company Tether recorded a record $5.2 billion in profits in the first half of 2024. Tether, headquartered in the British Virgin Islands, currently holds nearly $81 billion in US Treasuries.
The revenue generated by stablecoins could provide funding support for World Liberty's future plans, but launching a new stablecoin in the highly competitive market is no easy feat. Such projects need to strike deals with leading crypto exchanges like Coinbase and Binance to ensure the asset can reach a wide user base. Binance currently has a "strategic business partnership" with the issuer of the fifth-largest stablecoin FDUSD, First Digital Labs. Coinbase co-issues the second-largest USDC with Circle.
However, if Trump is elected again, he will have a unique position of strength in negotiating with these exchanges: Binance and Coinbase currently face long-running SEC lawsuits that impact their operational capabilities.
Trump also has connections to the world's largest stablecoin issuer. Tether relies on Wall Street asset manager Cantor Fitzgerald to custody "a significant amount" of the assets in its reserves, according to Cantor's CEO Howard Lutnick, who is currently the co-chairman of Trump's transition team.
Launching a collateralized stablecoin also requires substantial financial backing. According to Dune data, World Liberty Financial launched a governance token sale earlier this month, but has so far only sold around $14.24 million worth of tokens, just 4.7% of the 300 million tokens it plans to publicly offer.
Nevertheless, World Liberty Financial aims to leverage the Trump brand to become the preferred service for retail investors to enter the often opaque world of crypto trading and DeFi. The project has stated its mission is to "make crypto and America great again by driving mass adoption of stablecoins and decentralized finance."
While Trump and his crypto allies have enthusiastically touted the benefits of stablecoins in recent months, they have also strongly criticized the potential risks of a US central bank digital currency (CBDC) - essentially a government-issued stablecoin. Trump has repeatedly vowed that if elected again, he will ban the creation of a CBDC.
"This currency will give the federal government - that's our government - absolute control over your money," Trump said at a campaign event in New Hampshire earlier this year.
"They can take your money away," he added, "and you won't even know it's gone."
