A stablecoin pegged to the US dollar, introduced by a cryptocurrency platform associated with former President Donald Trump’s family, may complicate current bipartisan efforts in Congress to establish stablecoin regulations, leading to concerns regarding potential conflicts of interest.
The World Liberty Financial (WLFI) platform, linked to Trump, rolled out the World Liberty Financial USD (USD1) stablecoin in early March, stirring worries about such conflicts.
Despite opposition from Democratic legislators, WLFI’s approach aligns with existing US stablecoin legislation, as stated by Anastasija Plotnikova, co-founder and CEO of a blockchain regulatory firm.
“The proposed support, audits, qualified custody, transparent blockchains, and absence of native yield-generating features — all of these aspects are consistent with the GENIUS and STABLE acts,” she commented in a discussion.
“This can be seen as a supportive move for US-centric stablecoins, and importantly, any stablecoin issuer must obtain authorization from the OCC, state regulators, and the Federal Reserve’s Board of Governors,” she noted.
The release of this stablecoin coincides with two significant bills being considered in Congress.
The STABLE Act, introduced on February 6, seeks to provide a clear regulatory environment for dollar-based payment stablecoins. Its goals include enhanced transparency and consumer safety, allowing issuers the choice between federal and state oversight.
Source: STABLE Act
The GENIUS Act, which stands for Guiding and Establishing National Innovation for US Stablecoins, aims to set collateralization standards for stablecoin issuers while ensuring adherence to Anti-Money Laundering regulations. This act recently passed the Senate Banking Committee with an 18–6 vote.
While some view WLFI’s stablecoin as a positive advancement for cryptocurrency acceptance, others express concern that it might hinder the progress of pertinent legislation by introducing political complications.
“Trump’s new US dollar-pegged stablecoin, USD1, is causing difficulties for bipartisan initiatives aimed at passing stablecoin legislation, like the GENIUS Act,” noted Dmitrij Radin, founder of Zekret and chief technology officer of the blockchain regulatory firm.
“Given the Trump family’s significant stake in this, critics such as Senator [Elizabeth] Warren and Representative [Jim] Himes are highlighting possible conflicts of interest,” Radin shared, adding:
“There’s apprehension that any new law could financially benefit Trump, which may make some lawmakers reluctant to support it. While the legislation might still advance, this additional layer could lead to delays or induce stricter regulations to ensure neutrality.”
Even as stablecoins seem poised for widespread acceptance, “political turmoil” could push innovation abroad if regulators impose excessive restrictions, Radin remarked, indicating that banks and the Federal Reserve continue to resist stablecoin integration.
In the meantime, professionals in the cryptocurrency sector have urged US legislators to clarify regulations surrounding stablecoins and crypto banking relationships before the focus shifts to tax laws related to cryptocurrency.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered