Partnership-building is a challenge for World Liberty Financial, and it may encounter pushback from nations leery of stablecoins backed by US dollars.
TThe goal of the Trump family’s World Liberty Financial (WLF) venture is to increase the value of the US dollar in the cryptocurrency space, particularly in decentralized finance (DeFi).
Using DeFi, this project aims to maintain the dollar’s leadership position among international digital currencies. It draws attention to the Trump family’s increasing interest in cryptocurrencies and their endeavors to integrate blockchain technology with conventional US financial techniques.
This week, WLF declared its goal of establishing US-pegged stablecoins throughout the globe in order to maintain US financial leadership.
However, specialists point out that the project has substantial obstacles that could stand in the way of its success.
Trump Crypto Project Faces Challenges Amid Regulatory Pressure and Stablecoin Competition
With the continued regulatory attention that DeFi and stablecoins are receiving, WLF might face a number of difficulties. In order to determine whether DeFi platforms are subject to current securities laws or require new regulations, the SEC and other US regulatory bodies are closely monitoring these platforms.
Major platforms like Uniswap have received Wells Notices from them, indicating that they might have to register as securities exchanges or adhere to regulations typically imposed on centralized financial institutions.
In keeping with this, bitsCrunch CEO Vijay Pravin stated that WLF needs to abide by KYC and AML laws. He brought up one of the project’s main challenges, which is forming alliances with banks and exchanges in various regulatory contexts.
He pointed out that certain nations might oppose or restrict the use of US dollar-backed stablecoins out of fear of US economic dominance. According to him, this is similar to the BRICS countries’ attempts to advance commodity trade in currencies other than US dollars.
Pravin added that a lot of other platforms share WLF’s objectives. He emphasized the fact that well-known stablecoins with a track record, like USDC and USDT, already have a large user base, liquidity, and market confidence.
“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
The CEO of Bittrex Global, Oliver Linch, emphasized that initiatives such as WLF’s are navigating uncharted territory in the absence of clear direction from Congress or the White House on stablecoin regulation. He pointed out that new players need to proceed cautiously and stablecoins are subject to intense regulatory scrutiny.
“Regulatory clarity will be the lynchpin that determines whether or not this initiative gains traction internationally, regardless of the level of demand,” Linch stated.
He also brought up operational issues, such as the project’s connections to Dough Finance employees, the company that was the victim of a $2.1 million flash loan hack in July.
In addition, he brought up operational issues, such as WLF’s connection to Dough Finance, which was the victim of a $2.1 million flash loan hack in July.
Nevertheless, WLF claims to have collaborated with cybersecurity companies such as PeckShield and Zokyo, who have examined its source code.
“This kind of reputational baggage could make things even more difficult, with regulators already on high alert about the potential systemic risks stablecoins pose,” Linch stated.
“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.”