New Stablecoin on the Horizon
World Liberty Financial, backed by former President Trump, is developing its own stablecoin to rival established competitors like Tether and USDC, though significant regulatory and capital challenges remain.
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World Liberty Financial, supported by former President Donald Trump, introduced its native token earlier this month. According to Decrypt, the company is now purportedly planning something more ambitious: its own stablecoin that can be used as a substitute for the US dollar.
Over the past three years, stablecoins, a kind of cryptocurrency that is based exactly on the value of a fiat currency such as the dollar or euro, have grown astronomically in popularity. The World Liberty team would be joining companies like PayPal, Coinbase, and Robinhood, all of which have or are creating their own stablecoins, if the news about the company, which was released on Monday by the cryptocurrency publication Decrypt, is true.
As the team tries to figure out "how to make the financial product safe before bringing it to market," the World Liberty stablecoin is still in development and will take some time to debut, an unnamed insider told Decrypt.
This change may have been anticipated by those closely monitoring the platform. Rich Teo, cofounder of Paxos, a stablecoin issuer that oversees the US dollar-backed Paxos Standard Token, or PAX, was revealed earlier this month by the World Liberty team to join the platform as its stablecoin and payments head.
But it is not as simple as employing one person to design a stablecoin. In addition to navigating murky legal and regulatory limits and requiring a significant amount of capital, it also takes endurance to compete with industry titans like Tether and USDC.
A stablecoin needs to be collateralised, or supported by a fiat currency, in order to guarantee its value at a single, consistent price. Crypto gimmicks have been used by certain projects to get around this constraint, but most of them have failed miserably, as was the case in 2022 when stablecoin issuer Terra flopped, losing billions of dollars.
Even though there are still concerns over the World Liberty team's strategy for creating a trustworthy stablecoin, if the initiative is successful, the Trump family stands to gain a substantial amount of money. The biggest stablecoin in the world, Tether, announced a record-breaking $5.2 billion profit in the first half of 2024 alone.
Described as a "decentralised finance money market," World Liberty Financial was revealed in early September, one and a half months before the election. As a so-called governance token, WLFI gives its holders the ability to vote on proposals, make decisions, and manage an on-chain cryptocurrency initiative. The token does not earn yield and is not transferable.
The company aimed to generate $300 million from the first sale and whitelisted over 100,000 certified investors before debut. With $14 million raised and only 4.7% of tokens offloaded, it has failed to meet that goal.
Disclaimer: This article is for informational and educational purposes only and should not be considered financial advice. Cryptocurrency investments involve risk, and you should conduct your own research or consult a qualified financial professional before making any investment decisions. AFRIDAX does not guarantee any returns, and past performance is not indicative of future results.