A crypto project initiated by Donald Trump has recently closed the token sale at $14 million and now seeks to create a stablecoin. A stablecoin is a form of cryptocurrency designed to have a relatively stable value. Most times, it’s pegged to the value of the U.S. dollar, but there is no reason that a stablecoin would need to be pegged to that.
World Liberty wants a stablecoin to be secure and compliant so that it can be one of the major players in the crypto space, and thus, the development process continues with the team focusing on ensuring reliability and legality before opening the stablecoin for use. World Liberty recently appointed Rich Teo, a co-founder of stablecoin issuer Paxos, to head the stablecoin.
Stablecoins: A Key Element in Crypto Markets
Stablecoins are an indispensable part of the crypto space. They allow users to hedge funds against the vagaries of the market, offering digital dollar substitutes where traditional dollars are banned; they thus act as mediators between crypto and traditional finance. Huge stablecoins such as USDC by Circle and USDT from Tether are backed up by billions of dollars worth of collateral, meaning stability and the trust which comes with it.
Traditionally, stablecoins have been collateralized in two ways: fiat currency dollars or crypto asset collateral. However, not all tests of crypto-backed stablecoins have succeeded. One such recent failure was Terra’s UST, which wiped out about $60 billion from the crypto market in 2022 when the peg to the dollar for it broke. World Liberty’s stablecoin will likely involve holding substantial reserves in either fiat or equivalent assets to prevent similar risks.
The legality of stablecoins remains a complex issue within the U.S. legal framework. The U.S. Securities and Exchange Commission has filed lawsuits against a number of companies operating in the crypto universe, including stablecoin issuers, for alleged unlawful unregistered securities offerings. Some recent dismissals show regulatory clarity around stablecoins is still very much in its development. Stability is being discussed legislatively, and votes could arise within the next year. This would create an unprecedented situation wherein, if he is re-elected, Donald Trump would sit in the White House while Congress was debating bills affecting his financial products related to the crypto project.
Potential Profits from Stablecoin Operations
Huge returns from issuing stablecoins also have potential. The stablecoin issuers may put the reserves in yield-bearing assets like U.S. Treasury bills and earn huge returns. For example, Tether reportedly pocketed $5.2 billion in the first half of 2024 because it maintained massive reserves in T-bills. The same could help World Liberty in generating large revenues, but this would only be possible if they manage to have a strategic partnership with the biggest exchanges, such as Coinbase and Binance.
The token sale for World Liberty Financial has been a lukewarm affair, raising only $14 million toward a goal of $300 million. That is a far cry from what the project needed to be funded, given the premium price to enter the market that launching a well-backed stablecoin would incur. That could impact the time frame for development, but the appeal of the Trump brand would be enough to bring in some retail investors and interest for the stablecoin as this project matures.
World Liberty’s Mission and Stablecoin Strategy
World Liberty Financial was pitched as the vehicle in which the average American retail investor can gain access to DeFi and stablecoin markets. According to the report, the project aims to “increase mass adoption of stablecoins and DeFi in the U.S.”. Stablecoins are the only means of sustaining the influence of the U.S. dollar across the world, according to Trump’s campaign team. On the other hand, CBDCs have attracted criticism from Trump, who has attacked them as an antipathy to personal financial freedom. He has, in his campaign events, pledged to ensure that no government-issued CBDC emerges if he takes the oath of office again.
A hybrid of cryptocurrency, financial innovation, and political intrigue, the World Liberty Financial project aims to create a stablecoin. The project may bring in significant profits and open a new avenue for retail investors in DeFi. There are still regulatory challenges and public skepticism about crypto investments. World Liberty can be a significant player in the stablecoin market, considering the potential for profit along with the mission to promote dollar-backed stablecoins. However, it has to navigate a crowded and highly competitive regulated space demanding large capital, strategic partnership, and regulatory finesse.
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