Trump Family’s Crypto Venture May Struggle Due to Critical Challenges, Experts Warn

DeFi Trump

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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Last updated: 

September 5, 2024

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The Trump family is launching World Liberty Financial (WLF) to boost the US dollar’s presence in the crypto sector, specifically within decentralized finance (DeFi).

This project seeks to use DeFi to keep the dollar at the forefront of global digital currencies. It highlights the Trump family’s growing involvement in cryptocurrencies and their effort to combine traditional US financial strategies with blockchain technology.

This week, WLF announced its mission to secure the US’ financial leadership by spreading US-pegged stablecoins around the world.

Nonetheless, experts highlight that the project faces significant hurdles which might prevent its success.

Trump Crypto Project Faces Challenges Amid Regulatory Pressure and Stablecoin Competition

Considering the ongoing regulatory scrutiny on DeFi and stablecoins, WLF may encounter several challenges. The SEC and other US regulatory bodies are closely examining DeFi platforms to decide if they fall under existing securities laws or need new regulations.

They have sent Wells Notices to major platforms like Uniswap, signaling that these platforms may need to register as securities exchanges or comply with rules usually applied to centralized financial institutions.

In line with this, Vijay Pravin, CEO at bitsCrunch, said WLF must comply with KYC and AML regulations. He pointed out a key challenge that the project faces — building partnerships with banks and exchanges across different regulatory environments.

He noted that some countries, cautious of US economic influence, might resist or limit the use of US dollar-backed stablecoins. This situation resembles BRICS nations’ efforts to promote commodity trade in non-US dollar currencies, he added.

Pravin also noted that many other platforms have similar goals to WLF. He highlighted that established stablecoins like USDC and USDT already have liquidity, strong user communities and trust in global markets.

“This competition may force World Liberty Financial to offer significantly better incentives or features to differentiate itself,” he said.

“Additionally, CBDCs, which are gaining momentum in countries like China (e.g., the digital yuan), could limit the adoption of US-pegged stablecoins by offering government-backed alternatives.”

Security Risks for WLF’s Stablecoin Project

Oliver Linch, CEO at Bittrex Global, stressed that without clear guidance from Congress or the White House on regulating stablecoins, projects like WLF’s are navigating uncharted territory. He noted that stablecoins face heavy regulatory scrutiny and new players must proceed carefully.

“No matter how much demand exists, regulatory clarity will be the lynchpin that determines whether or not this initiative gains traction internationally,” Linch said.

He also pointed to operational concerns, including the project’s ties to individuals from Dough Finance, which suffered a $2.1m flash loan hack in July.

He also pointed out operational challenges, including WLF’s ties to Dough Finance, which suffered a $2.1 million flash loan hack in July.

Even so, WLF says it has partnered with cybersecurity firms like PeckShield and Zokyo, who have reviewed its codebase.

“With regulators already on high alert about the potential systemic risks stablecoins pose, this kind of reputational baggage could make things even more difficult,” Linch said.

“If the operational integrity of World Liberty Financial is compromised, it could deal a significant blow to the project’s credibility. In a sector where trust and security are paramount, any such misstep could spell disaster.”