World Liberty Financial Launches New Stablecoin Amid Controversy
World Liberty Financial, a crypto enterprise associated with President Trump’s family, introduced a new stablecoin worth $25 million on Monday. This coincides with the amount the company mentioned it had repaid to various lending platforms last week, following a report from CoinDesk.
Just last Friday, the company announced it had repaid $15 million on April 9 and another $10 million on April 11 regarding a roughly $75 million loan obtained from Dolomite, a lesser-known lending platform where a co-founder serves as an advisor for WLFI.
On Monday morning, WLFI issued $25 million in USD1, its proprietary stablecoin pegged to the dollar and managed by the company with help from its custodian, BitGo. Interestingly, they also permanently destroyed $3 million of existing USD1, leading to an overall net increase of $22 million in circulation.
These matching amounts raise a few questions. Did WLFI repay its loan using pre-existing funds and then print new tokens to restock its treasury? Or was the creation of new tokens specifically for making those repayments?
WLFI did not respond to requests from CoinDesk for comments.
This development is happening against a backdrop of intense debate that kicked off on April 9. A CoinDesk article revealed that WLFI had pledged billions of its tokens to Dolomite as collateral, borrowing stablecoins in return. This sparked outrage in both the crypto and political circles. Notably, Justin Sun of Tron, a significant supporter of the project, criticized the team for treating users like “personal ATMs” and for charging unfair fees.
As a result of this borrowing, the lending pool for USD1 on Dolomite became nearly fully utilized, preventing other users from withdrawing their deposits, as nearly all available funds were borrowed by WLFI.
In response, WLFI labeled the concerns as “FUD” and described itself as an “anchor borrower” meant to generate yield for others. The company asserted there was “no liquidation risk” and mentioned it could “provide additional collateral” should market dynamics shift negatively. Additionally, World Liberty Financial hinted at potential legal action against Justin Sun via a post on social media.
The token’s value dropped by 12% on that day and has since seen a further decline, currently trading about 20% lower than prior to the CoinDesk report.
Recent on-chain data indicates WLFI has generated approximately $38.5 million in new USD1 over the last five days through several large minting activities: $12.5 million on April 8 (the night before the CoinDesk article was released), $8 million on April 10 (the day after the first repayment), and $18 million on April 12 (the day after the second repayment).
These minting operations seem to follow closely after the repayment timeline.
Stablecoins like USD1 are generally supposed to be backed 1:1 by actual dollars or dollar equivalents in reserve. When new tokens are created, it implies new reserves are being introduced. Conversely, destroying tokens usually indicates that someone has redeemed them for real dollars. WLFI has full control over USD1, meaning it decides when to create new tokens and when to remove old ones.
The $3 million worth of tokens that were permanently destroyed came from an address on BSC and were sent to a dead-end address via a contract controlling USD1’s rules. WLFI has yet to explain why these tokens were eliminated rather than repurposed.
Even after claiming to have repaid $25 million, Dolomite still has around $50 million outstanding, secured by token collateral that has depreciated by about 15% since the initial report emerged.
Updated (April 13th, 2:47pm): The headline and story have been revised to provide more context.
