Source: Cointelegraph Original: "{title}"
The Trump family's cryptocurrency project, World Liberty Financial Inc. (WLFI), is planning to issue a stablecoin, raising concerns about the former president's involvement in the digital asset industry.
The project launched a memecoin just before President Donald Trump's inauguration, which saw a price surge followed by a rapid decline, leading many to accuse WLFI of being a pump-and-dump scheme.
WLFI also immediately purchased millions of dollars in crypto tokens before significant events related to cryptocurrency or announcements impacting the industry that the president attended. Before the White House cryptocurrency summit on March 7, WLFI bought $20 million worth of various tokens.
As World Liberty Financial's portfolio grows and regulatory oversight of the cryptocurrency industry diminishes, observers and legal scholars are increasingly worried about potential conflicts of interest within the Trump administration.
Son Eric Trump pumps his father’s memecoin ahead of the inauguration. Source: Eric Trump
WLFI announced on March 25 that it would launch a new stablecoin, USD1, "100% backed by short-term U.S. government bonds, dollar deposits, and other cash equivalents."
WLFI co-founder Zach Witkoff stated in the announcement that the token could be used for "seamless, secure cross-border transactions."
Just days after WLFI raised over $500 million by selling its own WLFI tokens, news of the upcoming USD1 issuance followed.
Observers have begun to raise alarms about the security risks that a stablecoin associated with the president could pose. Additionally, there are concerns about potential market manipulation and violations of the U.S. Constitution's emoluments clause, which is designed to prevent undue influence on American leaders.
Regarding the latter, internet and digital media lawyer Andrew Rossow told Cointelegraph that the stablecoin is "a direct affront to constitutional safeguards designed to prevent conflicts of interest."
"Since Trump and his family control 60% of World Liberty, the USD1 stablecoin could facilitate indirect economic benefits or improper foreign influence on U.S. policy, especially if foreign entities invest in or use the stablecoin."
WLFI makes up a sizeable chunk of Trump’s estimated net worth. Source: Fortune
Corey Frayer, who was responsible for cryptocurrency policy at the SEC under former President Joe Biden, stated that the project's emphasis on cross-border payments is particularly concerning, as foreign entities may view investment as a way to gain favor with Trump.
"This market has a lot of opacity and has previously been associated with illicit finance," Frayer told The New York Times.
Since Trump launched the eponymous memecoin in January, U.S. policymakers have taken note of the potential for foreign influence.
At that time, Democratic Congresswoman Maxine Waters, the top Democrat on the House Financial Services Committee, wrote, "Anyone globally, even individuals sanctioned or barred from our capital markets, can now trade Trump coins and profit through various unregulated platforms."
Related: Congress repeals IRS broker rule, but can it regulate DeFi?
In addition to potential foreign influence, observers are also concerned that Trump's cryptocurrency investments could threaten market stability and integrity, leading to manipulation of global markets.
Heath Mayo, founder of the Trump-aligned conservative movement "Principles First," stated regarding USD1 that the current president issuing instruments backed by government bonds should be illegal, adding that the project has "terrible motives, corruptly using American taxpayers' credit."
Rossow stated that the president's role in the stablecoin project, while also working on stablecoin legislation in the form of the GENIUS Act, is "unconstitutional behavior that could undermine the integrity of regulation."
Trump's influence over the industry, along with his ability to encourage cryptocurrency executives who support him to abandon enforcement actions, creates "an unfair competitive environment that disadvantages competitors, violating the principle of equal protection under the law."
For a long time, Trump has had a fondness for former President Andrew Jackson, seemingly adhering to the latter's strategy of acknowledging judicial rulings and then disregarding them to do as he pleases.
Earlier this month, the White House ignored a federal judge's verbal order to turn two planes filled with individuals accused of being gang members back to a terrorism detention center in El Salvador, indicating the administration's willingness to defy federal court orders.
Regarding cryptocurrency, Senator Elizabeth Warren has called for an ethical investigation into Trump's cryptocurrency activities. She stated that the president's memecoin "allows Trump personally to rake in profits, providing a mechanism for the cryptocurrency industry to funnel cash to him and creating an unstable financial asset that allows anyone in the world to financially speculate on Trump's political fate."
Warren, a longtime crypto critic, has taken aim at WLFI. Source: Senate Banking Committee
Congressional Republicans are busy drafting the GENIUS Act, which has even garnered support from some Democrats.
If something can be done, what can be done?
Rossow stated that despite changes in the leadership of the SEC, other agencies like the Financial Crimes Enforcement Network can still conduct investigations.
He also noted that local regulators and attorneys general taking action at the state level "is not only possible but necessary, especially in states with robust consumer protection laws."
He added that international regulatory bodies could apply pressure, pointing out that the "global nature" of cryptocurrency means foreign governments can work to enhance oversight and develop more robust regulations.
Related link: Who is attending Trump's campaign to make America a "Bitcoin superpower"?
In any case, he stated that the current situation requires multifaceted action, as there is a need to "defend the principles of fair governance and uphold America's credibility in the global financial system."
Some in the cryptocurrency industry see no issue at all, believing the president's involvement is merely another sign that the industry is gaining mainstream appeal.
Chris Barrett, senior communications director at Chainlink, congratulated the project, stating, "The global financial world runs on the dollar, and stablecoins will make it harder to change that."
Arnoud Star Busmann, CEO of European stablecoin issuer Quantoz Payments, told Cointelegraph that USD1 reflects "the increasing confirmation from world-leading brands that stablecoins are paving a path for mainstream finance to access crypto assets and tokenized real-world assets."
The Blockchain Association—a lobbying group for the industry—declined to comment to Cointelegraph.
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