WLFI Token Sees Decline Following Controversial Lending Practices

World Liberty Financial’s WLFI token has dropped approximately 12% in just 24 hours. This decline came after the Trump-associated crypto venture defended its lending strategy related to Dolomites, a DeFi protocol with ties to WLFI’s advisory team.

The discussion began as a response to a CoinDesk article indicating that WLFI had put its governance token up as collateral and taken out stablecoins, which led to a depletion of the $1 loan pool, effectively restricting withdrawals for other users.

When approached for comment, WLFI did not specifically address the allegations regarding the transactions. Instead, they opted for a series of social media posts to clarify their stance following the CoinDesk piece, which had suggested the action was intentional and beneficial.

“We’re one of the largest suppliers and borrowers in the WLFI market,” the post stated. “Yes, we used our WLFI as collateral and borrowed stablecoins. No, we’re not close to liquidation. Honestly, even if market conditions change dramatically, we’ll simply add more collateral.”

The communication from WLFI also mentioned plans to increase its token collateral, which raised more concerns rather than alleviating them as highlighted in the CoinDesk article. This cycle of using WLFI to back WLFI positions—advised by their own team—might be something that investors keep an eye on.

The company describes itself as an “anchor borrower,” suggesting that their borrowing activities help generate yield for other users, especially during times when conventional markets are underwhelming. They shared their recent buybacks of 435.3 million WLFI tokens, totaling around $65.58 million over the last six months at an average price of $0.1507. A governance proposal to release some tokens for earlier holders is set to be unveiled next week.

Currently, the token trades about 48% below the average repurchase price, putting WLFI’s own bond purchases significantly in the negative.

WLFI has now reached its lowest trading level since it began in 2025.

In addition, there are around 3 billion WLFI tokens in intermediate wallets, a result of transfers by the Treasury earlier this month. This amount is now valued at around $234 million, down from $266 million last week.

If these tokens continue their trajectory, the implications for WLFI could be unfavorable. A lower token price diminishes borrowing power, and using more tokens to access stablecoins from a depleted pool complicates things for other depositors looking to withdraw. With the value backing their positions concentrated in a token that just fell by 12% in one day, the challenges are mounting.