Donald Trump’s controversial crypto project, World Liberty Financial, which recently raised $14 million in an initial token sale, plans to create and issue its own stablecoin, according to sources familiar with the matter. The stablecoin, a type of cryptocurrency designed to maintain a steady value often pegged to the U.S. dollar, is still in development and may take some time to launch. The World Liberty team is currently working on ensuring the safety of the financial product before bringing it to market. Additionally, the team is concurrently developing other major components of World Liberty Financial, including the stablecoin, to ensure they are ready for launch at the appropriate time. The project recently announced that Rich Teo, co-founder of stablecoin issuer Paxos, will serve as World Liberty’s stablecoin and payment lead. Stablecoins play a crucial role in the crypto ecosystem, providing a means for crypto traders to hold their funds in digital assets that maintain a fixed price, even in a volatile market. They also serve as dollar equivalents in markets where access to dollars is restricted, facilitating the transition between crypto and traditional financial markets. To maintain their stability, stablecoins require substantial collateralization. The leading U.S.-based stablecoin issuer, Circle, holds $34.59 billion worth of dollar-denominated assets in regulated American financial institutions to back its stablecoin, USDC, which is currently in circulation. Other stablecoin projects have attempted alternative methods of collateralization, such as using crypto as backing, but these approaches have faced challenges. The legality of stablecoins in the United States is still a subject of debate. The U.S. Securities and Exchange Commission (SEC) has previously filed lawsuits against companies like Binance for issuing stablecoins, claiming that these tokens are illegal and unregistered securities offerings. However, a federal judge dismissed the stablecoin-related charges against Binance earlier this summer. Several federal lawmakers have indicated their intention to legislate on stablecoins in the coming year, potentially creating a scenario in which Trump, if re-elected, would oversee the White House while Congress determines the legality of a financial product his business partners intend to offer. Despite the potential legal challenges, stablecoins can generate significant profits for issuers. Similar to banks, stablecoin issuers earn revenue by investing customer deposits in yield-bearing products like U.S. Treasury bills. For example, Tether, the company behind the leading stablecoin USDT, reported a record $5.2 billion in profit in the first half of 2024 and currently holds nearly $81 billion in T-bills. Stablecoin revenue could support World Liberty’s future plans, but launching a new stablecoin in an already crowded market would be a challenging task. It would require partnerships with leading crypto exchanges like Coinbase and Binance to make the asset widely available. Notably, both exchanges are currently facing SEC lawsuits that threaten their operations. Trump also has connections to the top stablecoin issuer, Tether, as the company relies on Cantor Fitzgerald to custody a significant portion of its assets. Cantor CEO Howard Lutnick co-chairs Trump’s transition team. Launching a collateralized stablecoin would also require substantial capital. World Liberty Financial has only managed to sell $14.24 million worth of tokens so far, which is a small fraction of the $300 million worth of tokens earmarked for public sale. However, the project plans to leverage the Trump brand to become the preferred service for retail investors entering the world of crypto trading and decentralized finance. While Trump and his crypto allies have highlighted the benefits of stablecoins, they have also criticized the dangers of a central bank digital currency (CBDC) issued by the U.S. government. Trump has vowed to ban the creation of a CBDC if re-elected, arguing that it would give the government absolute control over people’s money.
