World Liberty Financial Whitepaper Analysis: What’s the Outlook for the USD1 Stablecoin?

The cryptocurrency project World Liberty Financial (WLFI), supported by the family of former U.S. President Donald Trump, has quickly become a focal point for the integration of politics, finance, and blockchain technology since its establishment in 2024. The project’s White Paper outlines an ambitious blueprint that encompasses decentralized finance protocols, governance tokens, and the stablecoin USD1, while also sparking ongoing controversies due to issues of profit distribution and compliance.

White Paper core content: Governance structure and profit distribution

1. Project Background and Role Positioning: WLFI is positioned as a decentralized financial platform for “user co-governance”, covering lending, stablecoin, and token governance functions. Trump is listed as the “Chief Crypto Advocate”, with his sons Eric Trump and Donald Trump Jr. serving as “Web3 Ambassadors”, while 18-year-old Barron Trump is bestowed with the title of “DeFi Visionary”. The White Paper also states that the Trump family “does not own, manage, or operate the company”, and may only receive honorary compensation.

2. Token Allocation Dispute

   • Highly centralized control: The Trump family controls 22.5 billion governance tokens WLFI (accounting for 22.5% of the total supply) through the holding company DT Marks DEFI LLC, and enjoys 75% of the net income distribution rights of the protocol.
   • Insider-led: 70% of WLFI tokens are reserved for founders, team, and service providers, with only 30% available for public sale.
   • Non-transferable Design: WLFI tokens were initially set as non-transferable, meaning users cannot trade or transfer them, and can only be used for governance voting, which greatly limits liquidity.
3. Financing and Capital Flow: The project raised $550 million through two rounds of token sales, with a valuation of $1.5 billion. Of this, $30 million was reserved for operating funds, but the first round of public sales only achieved $12.9 million, falling short of the initial target.

USD1 stablecoin: Product Design and Market Positioning

1. Institutional-grade security architecture: USD1 will be launched in March 2025, featuring 100% reserve asset backing, with underlying assets anchored in short-term U.S. Treasury bonds, U.S. dollar deposits, and cash equivalents, eliminating the decoupling risk associated with algorithmic stablecoins. Its reserves are managed by BitGo, the world’s largest custodian, and are subject to regular audits and insurance coverage, directly addressing institutional clients’ core needs for security and compliance.

2. Cross-border financial scenario breakthrough: USD1 positions as a “seamless cross-border transaction tool,” with key use cases already implemented:

   • In May 2025, the UAE sovereign fund MGX completed a $2 billion investment in Binance using USD1.
   • Providing regulated liquidity services through BitGo Prime to lower the compliance barriers for traditional institutions participating in DeFi.
3. Multi-chain deployment and expansion: first launched in Ethereum and BNB Chain plans to expand to more public chains in the future and achieve interoperability between chains through the Chainlink cross-chain protocol.

Competitive Advantage: Political Resources and Compliance Dividends

• Policy endorsement: In line with the Trump administration’s strategy to “consolidate dollar hegemony”, the Treasury Secretary publicly supports “using stablecoins to maintain the dollar’s status as the global reserve currency”, and the “GENIUS Act” paves the way for banks to issue stablecoins.

• Sovereign-level cooperation: Early adoption by institutions such as the Abu Dhabi Government Fund, verifying its credibility in large-scale cross-border transactions.

• Compliance barriers: BitGo’s custody and auditing mechanisms create a differentiated advantage, being evaluated as a “major breakthrough in the institutional digital asset space.”

Risks and Challenges

1. The market is highly crowded: we must face competition from giants such as Tether (USDT) and Circle (USDC), while traditional financial forces like PayPal and Ripple have also entered the arena, making user migration costs extremely high.

2. Centralization and Regulatory Concerns

   • Supply centralization: On-chain data shows that 84.4% of USD1 is controlled by two wallets, while another 9.5% is held by a third wallet, raising concerns about market manipulation.
   • Sovereign resistance risks: The European Central Bank warns that private stablecoins may undermine the traditional financial system. The EU MiCA regulation requires that most reserves be held in regulated banks and limits trading volumes.
3. Conflicts of interest controversy: U.S. Senate members question the Trump family’s potential conflicts of interest in receiving substantial shares (75% net income) through honorary positions, as the project’s compliance faces long-term scrutiny.

Future Prospects: Key Variables in the Institutional Market

The opportunity for USD1 lies in capturing the dual trends of the digitalization strategy of the US dollar and institutional adoption of DeFi. If it can continue to penetrate scenarios such as cross-border payments and sovereign fund transactions, it is expected to slice into the market share of giants in the era of stablecoin 2.0. However, its success or failure highly depends on:

1. The continuity of Trump’s political influence;
2. The tolerance of global regulatory agencies towards the “family control” model;
3. Whether it can surpass existing competitors in transparency (such as reserve auditing).

World Liberty Financial is both a testing ground for the Trump family to convert political capital into a cryptocurrency entity and a microcosm of traditional financial forces expanding the dollar hegemony through stablecoins. USD1 opens market gaps with institutional-grade design, but its highly centralized governance and family-first distribution model sharply contradict the DeFi ideal of “user co-governance.” If it cannot balance power structures and enhance transparency in the future, it is likely to struggle to establish a real foothold within the duopoly of USDT and USDC stablecoin framework.