World Liberty Financial's USD1 Stablecoin: Economic, Regulatory, and Ethical Implications

Abstract

The launch of World Liberty Financial's USD1 stablecoin presents a complex intersection of cryptocurrency innovation, regulatory scrutiny, and political influence. Issued by a company founded by Donald Trump and his family, USD1 is designed to maintain a 1:1 peg with the U.S. dollar, backed by U.S. Treasuries and managed by BitGo. However, its introduction raises concerns regarding conflicts of interest, reserve transparency, and regulatory arbitrage. This paper explores the economic and policy implications of USD1, analyzing its reserve structure, potential risks for holders, and its impact on financial markets. It also evaluates how regulatory frameworks, including the GENIUS Act and international stablecoin policies, may address or fail to mitigate these risks. The findings suggest that while USD1 may offer new efficiencies in digital payments, its unique governance structure demands enhanced oversight to protect market integrity and investors. Key policy recommendations are provided to address these emerging challenges.

Keywords: Stablecoins, cryptocurrency regulation, financial transparency, conflicts of interest, digital assets, financial stability, regulatory policy, World Liberty Financial, politics

JEL Classification: G28, E42, E58, K22, L51, O16, G15