Trump’s USD1 stablecoin deepens concerns over conflicts of interest
World Liberty Financial (WLFI), the Trump family’s crypto project, is planning to release a stablecoin, raising concern over the US president’s exposure to the digital asset industry.
The project released a memecoin immediately prior to President Donald Trump’s inauguration, the price of which skyrocketed and crashed soon after, causing many to accuse WLFI of a pump-and-dump scheme.
WLFI also made multimillion-dollar purchases of crypto tokens immediately prior to important crypto-related events the president has attended or announcements influencing the industry. WLFI purchased $20 million of various tokens ahead of the March 7 White House Crypto Summit.
As World Liberty Financial’s portfolio grows and regulator oversight disappears from the crypto industry, observers and legal scholars are becoming increasingly concerned over conflicts of interest within the Trump administration.
Son Eric Trump pumps his father’s memecoin ahead of the inauguration. Source: Eric Trump
Trump’s stablecoin, USD1, riddled with liabilities
WLFI announced on March 25 that it will launch the new stablecoin USD1, “100% backed by short-term US government treasuries, US dollar deposits, and other cash equivalents.”
WLFI co-founder Zach Witkoff said in the announcement that the coin can be used for “seamless, secure cross-border transactions.”
News of USD1’s forthcoming release came just days after WLFI secured more than $500 million through the sale of its own WLFI tokens.
Observers have already begun to raise the alarm about the possible security risks posed by a stablecoin connected to the president. There are also concerns over the possibility of market manipulation and violations of the emoluments clause of the US Constitution — a section of the document that protects against undue influence over American leaders.
As regards the latter, cyber and digital media attorney Andrew Rossow told Cointelegraph that the stablecoin is “a direct affront to constitutional safeguards meant to prevent conflicts of interest.”
“With Trump and his family controlling 60% of World Liberty’s equity interests, the USD1 stablecoin could facilitate indirect financial gains or undue foreign influence over US policy, particularly 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 worked on crypto policy at the Securities and Exchange Commission under former President Joe Biden, said that the project’s emphasis on cross-border payments was particularly worrisome and that foreign entities may invest as a way to gain favor with Trump.
“There’s a lot of opacity around this marketplace, and prior relationships with illicit finance,” Frayer told The New York Times.
US policymakers have already noted the possibility for foreign influence following the launch of Trump’s eponymous memecoin in January.
At the time, Democratic Representative Maxine Waters — a top Democrat on the House Financial Services Committee — wrote that “anyone globally, even individuals who have been sanctioned by the U.S. or banned from our capital markets, can now trade and profit off of $TRUMP through various unregulated platforms.”
Related: Congress repealed the IRS broker rule, but can it regulate DeFi?
In addition to potential foreign influence, observers are concerned that Trump’s crypto ventures could threaten market stability and integrity and open up global markets to manipulation.
Referencing USD1, Heath Mayo, founder of the Trump-alternative conservative movement Principles First, said that a sitting president issuing an instrument backed by public debt should be illegal, adding that the project had “terrible incentives and corrupt use of US taxpayer credit.”
Rossow said that the president’s role in a stablecoin project while at the same time working to craft stablecoin legislation in the form of the GENIUS Act is “a constitutional violation that could destabilize regulatory integrity.”
Trump’s influence over the industry and ability to drop enforcement actions against crypto executives who support him create “an uneven playing field, disadvantaging competitors and violating principles of equal protection under the law.”
Options for Trump’s crypto conflicts of interest
Trump, who has long stated an affinity with former President Andrew Jackson, seems to be holding to the latter’s strategy of acknowledging judicial rulings — and then doing what he wants regardless.
The presidential administration has already shown that it is willing to defy orders from federal judges when, earlier this month, it ignored a verbal order from a federal judge to turn around two planes full of alleged gang members bound for the Terrorism Confinement Center in El Salvador.
Regarding crypto, Senator Elizabeth Warren has already called for an ethics probe into Trump’s crypto activities. She said that the president’s memecoin “massively enriched Trump personally, enabled a mechanism for the crypto industry to funnel cash to him, and created a volatile financial asset that allows anyone in the world to financially speculate on Trump’s political fortunes.”
Warren, a longtime crypto critic, has taken aim at WLFI. Source: Senate Banking Committee
The probe, if it had a chance to begin with, doesn’t appear to have gone anywhere, and Congressional Republicans are busy working on the GENIUS Act, which even has the support of a handful of Democrats.
What, if anything, can be done?
Rossow said that, despite changes in SEC leadership, other agencies like the Financial Crime Enforcement Network could still pursue investigations.
He also noted that state-level action from local regulators and attorneys general is “not just possible but imperative, especially in states with robust consumer protection laws.”
He added that international regulatory bodies could exert pressure, stating that the “global nature” of crypto means that foreign governments could work for better oversight and more robust regulations.
Related: Who’s running in Trump’s race to make US a ‘Bitcoin superpower?’
In any case, he said that the current situation demands multifaceted action, as there is currently a need to “safeguard the principles of fair governance and maintain the US’s credibility in the global financial system.”
Some in the crypto industry see no problem at all and believe the president’s involvement is just another sign of how the industry is reaching mainstream appeal.
Chris Barrett, senior director of communications at Chainlink, congratulated the project, stating that “the global financial world runs on the U.S. dollar, and stablecoins are about to make that even harder to change.”
Arnoud Star Busmann, CEO of European stablecoin issuer Quantoz Payments, told Cointelegraph that USD1 is reflective of “increasing validation from world-leading brands that stablecoins are carving the path for the mainstream financial industry to access crypto assets and tokenized real-world assets.”
The Blockchain Association — an industry lobby group — declined Cointelegraph’s request for comment.
Magazine: Arbitrum co-founder skeptical of move to based and native rollups: Steven Goldfeder
Institutional adoption of Bitcoin in the European Union remains sluggish, even as the United States moves forward with landmark cryptocurrency regulations that seek to establish BTC as a national reserve asset.
More than three weeks after President Donald Trump’s March 7 executive order outlined plans to use cryptocurrency seized in criminal cases to create a federal Bitcoin (BTC) reserve, European companies have largely remained silent on the issue.
The stagnation may stem from Europe’s complex regulatory regime, according to Elisenda Fabrega, general counsel at Brickken, a European real-world asset (RWA) tokenization platform.
“European corporate adoption remains limited,” Fabrega told Cointelegraph, adding:
“This hesitation reflects a deeper structural divide, rooted in regulation, institutional signaling and market maturity. Europe has yet to take a definitive stance on Bitcoin as a reserve asset.”
Bitcoin’s economic model favors early adopters, which may pressure more investment firms to consider gaining exposure to BTC. The asset has outperformed most major global assets since Trump’s election despite a recent correction.
Asset performance since Trump’s election victory. Source: Thomas Fahrer
Despite Trump’s executive order, only a small number of European companies have publicly disclosed Bitcoin holdings or crypto services. These include French banking giant BNP Paribas, Swiss firm 21Shares AG, VanEck Europe, Malta-based Jacobi Asset Management and Austrian fintech firm Bitpanda.
A recent Bitpanda survey suggests that European financial institutions may be underestimating crypto investor demand by as much as 30%.
Related: Friday’s US inflation report may catalyze a Bitcoin April rally
Europe’s “fragmented” regulatory landscape lacks clarity
The EU’s slower adoption appears tied to its patchwork of regulations and more conservative investment mandates, analysts at Bitfinex told Cointelegraph. “Europe’s institutional landscape is more fragmented, with regulatory hurdles and conservative investment mandates limiting Bitcoin allocations.”
“Additionally, European pension funds and large asset managers have been slower to adopt Bitcoin exposure due to unclear guidelines and risk aversion,” they added.
Related: Bitcoin ‘more likely’ to hit $110K before $76.5K — Arthur Hayes
Beyond the fragmented regulations, European retail investor appetite and retail participation are generally lower than in the US, according to Iliya Kalchev, dispatch analyst at digital asset investment platform Nexo.
Europe is “generally more conservative in adopting new financial instruments,” the analyst told Cointelegraph, adding:
“This stands in stark contrast to the deep, liquid, and relatively unified US capital market, where the spot Bitcoin ETF rollout was buoyed by strong retail demand and a clear regulatory green light.”
iShares Bitcoin ETP listings. Source: BlackRock
BlackRock, the world’s largest asset manager, launched a Bitcoin exchange-traded product (ETP) in Europe on March 25, a development that may boost institutional confidence among European investors.
Magazine: Bitcoiner sex trap extortion? BTS firm’s blockchain disaster: Asia Express
The New York State Attorney General’s (NAYG) recent legal action against Galaxy Digital over its promotional ties to the now-collapsed cryptocurrency Terra (LUNA) was unfair and an abuse of the legal system, says SkyBridge Capital and founder Anthony Scaramucci.
“It’s LAWFARE, pure and simple due to an obscure but dangerously powerful New York law known as the Martin Act,” Scaramucci said in a March 28 X post.
Martin Law can “open the door for abuse”
“The law has no need to prove intent, creating a low standard of proof that can open the door for abuse like this. It shouldn’t exist,” he said.
New York’s Martin Act is one of the US’s strictest anti-fraud and securities laws, allowing prosecutors the power to pursue financial fraud cases without needing to prove intent. The NAYG alleged that Galaxy Digital violated the Martin Act over its alleged promotion of Terra, with Galaxy Digital agreeing to a $200 million settlement.
According to NAYG documents filed on March 24, Galaxy Digital acquired 18.5 million LUNA tokens at a 30% discount in October 2020, then promoted them before selling them without abiding by disclosure rules.
Scaramucci reiterated that Galaxy CEO Michael Novogratz was under the impression everything he was saying about Luna was true, as he had been deceived by Terraform Labs and its former CEO, Do Kwon.
Source: Amanda Fischer
Meanwhile, MoonPay president of enterprise, Keith Grossman, said he had never heard of the Martin Act and had to look it up using AI chatbot ChatGPT.
“It is so broad and essentially is the essence of lawfare,” Grossman said. “Sorry you got caught in the crosshairs of it, Mike,” he added.
Related: Sonic unveils high-yield algorithmic stablecoin, reigniting Terra-Luna ‘PTSD’
The filing alleged that Galaxy helped a “little-known” token, referring to LUNA, increase its market price from $0.31 in October 2020 to $119.18 in April 2022 while “profiting in the hundreds of millions of dollars.”
Asset manager and investor Anthony Pompliano said he isn’t familiar with the details of the lawsuit but vouched for Novogratz, calling him a “good man” who has devoted a lot of time and money to helping others.
The Terra collapse is one of the crypto industry’s most infamous failures. In March 2024, SEC attorney Devon Staren said in the US District Court for the Southern District of New York that Terra was a “house of cards” that collapsed for investors in 2022.
Magazine: Arbitrum co-founder skeptical of move to based and native rollups: Steven Goldfeder
Billionaire investor Elon Musk has sold his social media platform X to his AI startup xAI, sparking controversy as it coincides with a US judge rejecting his bid to dismiss a lawsuit tied to the social media platform.
The transfer of ownership of X to xAI on March 28 means that the class-action lawsuit against Musk — accusing him of defrauding former Twitter shareholders by delaying the disclosure of his initial investment in the social media platform — has become “a whole lot spicer,” Cinneamhain Ventures partner Adam Cochran said in a March 28 X post.
Acquisition may open up xAI to more ‘exposure’
On the same day that Musk said “xAI has acquired X in an all-stock transaction,” a US judge reportedly rejected Musk’s attempt to dismiss the lawsuit. Cochran said it has “opened up his AI entity to exposure here too, and it’s a much bigger pie.”
Source: Grok
Musk said the deal values xAI at $80 billion and X at $33 billion, factoring in $12 billion in debt from the $45 billion valuation. He originally bought X, formerly Twitter, for around $44 billion in April 2022.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said.
Source: Bryan Rosenblatt
“This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach,” he said, adding:
“This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.”
However, Cochran claimed that “Musk used his pumped up xAI stock to pay multiple times over value for X, but still take an $11B loss on the transaction.” He said that Musk is “screwing over xAI investors, and X investors” and was executed to sell user data to xAI.
Related: Elon Musk’s ‘government efficiency’ team turns its sights to SEC — Report
xAI is best known for its AI chatbot “Grok” which is built into the X platform. When Musk released it in November 2023, he claimed it could outperform OpenAI’s first iteration of ChatGPT in several academic tests.
Source: Raoul Pal
Musk explained at the time that the motivation behind building Grok is to create AI tools equipped to assist humanity by empowering research and innovation.
While Cochran said that Grok being valued at $80 billion is an “insanely dumb valuation,” crypto developer “Keef” disagrees. Keef said, “This is shady all around, but given the day, Grok is genuinely probably the top model for various tasks.”
Magazine: Arbitrum co-founder skeptical of move to based and native rollups: Steven Goldfeder
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