The latest player to jump into the very crowded stablecoin space is the self-described "stable genius" himself — President Donald Trump.
This week, his World Liberty Financial crypto project announced the launch of its own USD1 stablecoin, which will launch on Ethereum and Binance's blockchain to start. USD1 now joins the long list of stablecoins all fighting for market share to become the preferred digital dollar and will now compete with the likes of Tether's USDT, Circle's USDC, and others.
But when you step back and reflect on what it took to get to this point, suddenly the all-out war by Republicans waged on the campaign trail last year to block the government from launching a digital dollar (or central bank digital currency) looks like it may have been serving a different agenda.
There were warnings that the U.S. could weaponize the dollar against political opponents by turning off their ability to spend, or that America could come to look like China by having the government surveil every transaction.
If that were truly the concern, it's more confounding now to justify why World Liberty Financial would have chosen to build in tandem with Binance — the world's largest crypto exchange which was launched in China by Changpeng Zhao, who just served four months in California prison for money laundering charges after the company paid $4.3 billion in fines for allowing terrorist groups to transfer money.
But now, USD1 will live on Ethereum and Binance's BNB blockchain, which will align both projects at a very interesting time.
For one, Zhao recently said he wouldn't mind a pardon from President Trump to clear his name. And for two, more activity and adoption of the USD1 stablecoin would come to benefit them both — particularly as Congress finally gets around to finalizing the GENIUS Act, a monumental stablecoin that has been more than five years in the making to establish rules of the road for stablecoin issuers.
As expected, lobbying and political jockeying has already played a dominant role in the bill-making process.
The Coinbase-aligned stablecoin issuer Circle, which issues USDC, the second-largest stablecoin by market cap, led a push earlier this year to float an idea in Washington that stablecoin issuers should have to be registered in the U.S. in order to approved. That was a very obvious shot across the bow at the market leader Tether, which is based in El Salvador.
Tether, which has a market cap of nearly $150 billion, made more than $13 billion in profits last year despite only having about 100 employees.
It turns out helping give people access to dollars (who otherwise might not be able to) is a very good business. It's also somewhat tricky. As Binance learned the hard way, you can run into problems if you aren't doing a great job at monitoring and blocking criminals from making money using your crypto.
To that end, Tether has stepped up efforts over the years by working with regulators around the world to step in if nefarious actors do bad things with USDT.
But if you think about it, that's also one of the tricky things about being a private stablecoin issuer. Crypto fans have always celebrated Bitcoin as being permissionless money — or money that can't be taken from you or blocked and confiscated by any central authority. But stablecoin issuers have been doing this with their tokens more and more these days.
Trump's Commerce Secretary Howard Lutnick, who was the CEO at Cantor Fitzgerald, which stores Tether's billions of dollars in U.S. Treasurys that backstop its stablecoin, defended Tether numerous times on the campaign trail. Speaking before Trump at the Bitcoin conference in Nashville last summer, Lutnick put the people attacking Tether on notice.
"Every transaction on the blockchain is traceable and Tether will seize any amount of coin that is involved in illicit activity," he said. "Whoever said things about Tether, they are knowingly false, they know it's wrong and it needs to go away."
Now, it would seem that Trump's World Liberty Financial and their USD1 is going head to head with the favored coin of Secretary Lutnick. But for Trump, it's also particularly interesting. Because as the President of the United States, you would think he would only care about spending his time focusing on the actual dollar. On the campaign trail, he made that point clear while speaking alongside Sen. Tim Scott.
"I always liked one currency, I call it a currency, I like the dollar," Trump said during a Fox News campaign town hall. But now, that one currency is likely going to be used less, and instead, it will likelier be that people will interact with a bunch of digital representations of that currency, whether they use USDT, USDC, or World Liberty Financial's USD1.
In the announcement for USD1, World Liberty Financial noted that USD1 will be 100% backed by short-term U.S. government treasuries, U.S. dollar deposits, and other cash equivalents. As the stablecoin bill gets pushed through, it will be interesting to see if that also becomes the required norm for other issuers. Obviously, World Liberty Financial may have an advantage by virtue of the Trump family steering the ship, which raises some ethical concerns.
In January, right before being sworn in, another Trump-aligned company launched the $TRUMP memecoin that could have violated the Constitution's Emoluments Clause if he launched it after he was sworn in. The clause prevents the President and others in elected office from profiting from their positions of power. But that might not even be the most egregious trespass of USD1's launch.
Republicans stated numerous times that the desire to block the the Fed from exploring a government issued central bank digital currency was to prevent the idea of political opponents having their money "turned off" or gate-kept. (Indeed, there were examples in the pandemic of this actually happening in Canada, when protesters on the right challenged the standing political party's views.)
But Republicans also made it clear they didn't want to become a surveillance state like China.
"Something that concerns me a lot is the idea that we would look like China in anyway, so can I have your commitment that as long as you're the Chairman of the Federal Reserve system that we will never have a central bank digital currency?" newly elected Sen. Bernie Moreno, a favored candidate of the crypto lobby, asked Fed Chair Jerome Powell in February. A beaten-down Powell responded, "Yes."
But now, as Trump's World Liberty Financial launches their stablecoin with an exchange that was once launched in China, it's very interesting to consider what happens next. It's also interesting to consider the knock-on effects of more private-dollar issuers and potentially one community of similar beliefs all using one stablecoin, while half the country opts to use the other.
Could it lead to an unwinding of the currency that has held America together? Could it potentially be another thing that divides us at the cost of companies making more money by exporting dollars abroad? Or, will the benefits of finding new private buyers of U.S. debt to keep the American debt bubble from bursting outweigh those potential risks?
What's still staggering is that Tether continues to climb the chart of holders of U.S. debt by continuing to surpass countries like Germany and others. This year, Tether alone was the seventh-largest buyer of U.S. Treasuries.
As Congress continues to make progress on the GENIUS Act, and the SEC and other banking regulators clear the path for banks to hold stablecoins, the institutional dam is about to burst. Incredible amounts of money are about to flow into the sector as regulatory clarity finally get provided.
The stage has been set. Leaders may fall. The President's own crypto project has aligned itself with one of the most notorious crypto kingpins still at the table.
To the victor go the spoils.
