Binance’s former CEO Changpeng Zhao acknowledged the USD1 stablecoin in an X post on March 24. He clarified in another post that the USD1 stablecoin it is not yet tradable, cautioning the community against scams using the same name.
The official X page for WLFI has since quoted his tweet with an official warning, which stated that USD1 is not yet tradable and that users need to beware of scams.
Hours before CZ warned users about potential scams linked to USD1, he revealed in a post that the smart contract of the self-proclaimed “World Liberty Financial USD” stablecoin has been deployed on BSC.
“Welcome to @BNBChain!” His tweet read. “According to BSCScan, the smart contract was deployed 20 days ago. Build!” He concluded with an applause emoji.
World Liberty Financial USD (USD1) on BSCScan. Source: BSCScan
The post triggered excitement from users, with many claiming these are just signs that BNB season is about to begin in full swing. CZ’s clarification post came hours later.
“I was told since this post, a lot of scammers created coins with the same name. The official USD1 is not tradable yet. Please do not fall for the scams,” it read.
It was an attempt to keep his followers, many of whom are greatly influenced by his tweets, safe because even though he referred to it as “the official USD1,” CZ’s comment isn’t an actual indicator that there is an official partnership between Binance and World Liberty Financial.
Some users responded to his warning by criticizing his “spontaneous” posting style, pointing out that the community may take his posts completely out of context, which could create misunderstandings.
Talks of a WLFI-stablecoin began last year, triggering ethical concerns and complications
WLFI, the Trump family-linked crypto project, revealed plans to create and issue its own stablecoin last year October according to sources quoted by Decrypt.
The stablecoin is designed to hold a steady value that is pegged to the US dollar, but back in October, when the news first broke, it was revealed the World Liberty team was in the process of determining how to make the financial product safe before bringing it to market.
The moves that followed seemed to confirm a potential stablecoin venture, even including the appointment of Rich Teo, co-founder of stablecoin issuer Paxos, as World Liberty’s stablecoin and payment lead.
It has been months since then, and it is now about to become a reality despite the concerns.
World Liberty is already a very controversial business entity because of its links to the former—and now present—president of the US. However, the thought of Trump and his business partners issuing their own stablecoin is even more controversial as it poses regulatory hurdles spanning securities classification, financial licensing, AML/KYC compliance, reserve transparency, and political sensitivities.
For stablecoins to retain their stability, they need to be heavily collateralized. Take popular stablecoin issuer Circle for example; it reportedly holds billions worth of dollar-denominated assets at regulated American financial institutions to back its billions worth of stablecoin, USDC, currently in circulation.
Some projects, like Terra, have tried to circumvent this method of fiat collateralization, sometimes by using crypto as a backing, but they have failed. Terra’s method was successful for over a year until UST’s price collapsed to zero in May 2022, wiping out about $60 billion in value and triggering a bloody response from the broader crypto market.
More questions about how the USD1 will be promoted to market
How WLFI will address the problem of reserve transparency remains to be seen. However, the onboarding of experienced figures in the stablecoin industry like Rich Teo suggests WLFI is aware of the potential challenges.
Despite the potential legal and regulatory strife, having its own USD1 stablecoin could offer the World Liberty team huge profits. Like banks, stablecoin issuers rake in cash by reinvesting customer deposits in yield-bearing products like US Treasury bills.
Tether, the company behind USDT, reported a record $5.2 billion profit in the first half of 2024 alone. Revenue generated from having its own USD1 stablecoin could boost World Liberty’s future plans, but issuing a new stablecoin in an already saturated field is no easy task.
It would require deals with top crypto exchanges, such as Coinbase and Binance, to make the asset available to a large swath of users. However Binance currently has a “strategic commercial partnership” with First Digital Labs, issuer of the fifth-largest stablecoin by market capitalization, FDUSD while Coinbase co-issues USDC, the second largest, along with Circle.
Notably, another Trump venture, the Trump Media and Technology Group (TMTG) reached a nonbinding agreement with Crypto.com on launching a series of exchange-traded funds and exchange-traded products (ETFs) on Monday. However, there was no mention of any potential collaboration between the projects on any impending stablecoin projects.
The importance of stablecoins to the ecosystem has become apparent in the past couple of years. They have become the go-to assets for traders who want to preserve their funds even while the market fluctuates. They can also be used as dollar equivalents in markets where dollars are restricted or inaccessible, making them important bridges between crypto and traditional financial markets.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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