USD1: How a Stablecoin Backed by a Presidential Family Stands Out in Global Finance

1. Introduction: The Next Stop for Stablecoins

Image source: @wlfi/world-liberty-financial-plans-to-launch-usd1-the-institutional-ready-stablecoin-2606f48d72d0"">https://medium.com/@wlfi/world-liberty-financial-plans-to-launch-usd1-the-institutional-ready-stablecoin-2606f48d72d0

In the 2025 cryptocurrency market, stablecoins are quietly evolving into a critical infrastructure of the global digital financial system. Acting as “digital dollars” anchored to real-world assets, they serve not only as the medium fueling on-chain transactions, lending, and payments, but also as a bridge between traditional finance and the blockchain economy. In an increasingly fragmented global financial landscape, stablecoins have shifted from the periphery to the center, becoming a convergence point for financial innovation, regulatory policy, and even international monetary game.

During this phase of transformation, the rise of USD1 has been especially notable. It is not only a compliant stablecoin backed by 100% USD-equivalent assets and deployed on Ethereum and BSC, but also leverages the political influence of the U.S. president’s family, with its issuance led by World Liberty Financial (WLFI). This unique identity sets USD1 apart from traditional stablecoins from the outset, differing in technical approach, market positioning, and strategic objectives.

The competition among stablecoins has never been merely a product-level contest. Tether (USDT) gained an early lead by “prioritizing speed”, while Circle (USDC) attracted U.S. institutions through compliance and transparency. DAI of MakerDAO (later renamed as SKY) expanded the possibilities of DeFi-native through its algorithmic mechanism, and raising stars like Paxos and FDUSD have been refining their offerings between fiat regulation and cross-border settlement. Today, the entry of USD1 is not merely another stablecoin; it signals that national power, political capital, compliance framework, and blockchain finance are converging into a new stablecoin paradigm.

This paradigm is not only about the price anchoring mechanism of crypto assets, but also about how the global financial order is shaped. Should the digital dollar be market-driven or state-led? Should the development of stablecoins focus on expanding the on-chain ecosystem or integrating regulatory frameworks? And behind USD1, is it a deep penetration of traditional political power into the new financial frontier, or a market-driven experiment in crypto narratives?

This article delves into USD1 from multiple dimensions, including its product mechanism, compliance strategy, market positioning, ecosystem integration, and regulatory environment. By conducting an in-depth comparison with mainstream stablecoins such as USDT and USDC, we will systematically analyze how this new stablecoin is carving out a new niche in the stablecoin war. While USD1 may not be the first stablecoin, it could be the one with the strongest political symbolism and the clearest embodiment of emerging compliance trends.

2. Background: From WLFI to the Trump Family’s Crypto Chessboard

If the history of stablecoins is a race among capital, compliance, and technology, the emergence of World Liberty Financial (WLFI) is like opening a side door connecting “state power” and the “crypto market”.

2.1 World Liberty Financial (WLFI): Practitioners of a New Crypto-Conservatism?

WLFI is not a typical crypto startup. Founded in mid-2024, it exudes a strong “elite crypto” vibe: its founding team comprises former traditional finance professionals, family office representatives, and political capital operators, setting it apart from typical Web3-native teams from the outset. WLFI made its first public appearance during the WLFI token sale in October 2024, raising $550 million in a remarkably short period. Notably, up to 75% of the capital raised was reportedly linked to entities controlled by the Trump family.

In its early white paper, WLFI positioned itself as “compliance first, structural transparency, and service to sovereign institutions”, declaring its goal to build an “alternative dollar circulation infrastructure to replace the central bank”. While this statement might sound radical, it actually implies a market-oriented reinterpretation of the traditional logic of U.S. monetary hegemony—leveraging family financial influence, digital tools, and compliance frameworks to legitimize and scale a “private version of the digital dollar”.

2.2 The Trump Logic Behind USD1

Image source: https://x.com/worldlibertyfi/status/1904516935124988075

On March 25, 2025, WLFI announced the launch of the USD1 stablecoin, officially endorsed by the Trump family, causing a stir in the market. By this time, U.S. President Donald Trump had transformed from a former “crypto skeptic” into a “crypto advocate”. His administration not only strongly championed Web3 during the campaign but also swiftly pushed for crypto legislation and strategic reserve policies (including incorporating BTC, ETH, SOL, XRP, and others into the “national crypto reserve”) after taking office. The emergence of USD1 represents an extension of this political-financial strategy.

The Trump family is no stranger to the crypto industry. As early as 2024, Donald and Melania Trump each launched their own memecoins in succession, with $TRUMP reaching a market cap of over $14 billion in January 2025, despite a subsequent crash of over 80%. This demonstrates their substantial market influence. USD1, however, is far from a marketing stunt. As a stablecoin fully backed by U.S. Treasury bonds, dollar deposits, and cash equivalents, issued on-chain, and subject to third-party audits, USD1 aligns with USDC’s compliance model in both technical design and issuance processes. The only difference is that its backing no longer comes from Blackstone or Goldman Sachs, but from the White House and the presidential family.

This unique identity makes USD1 the world’s first stablecoin explicitly supported by the family of a sitting head of state. In the process of dollar internationalization, this is a symbolic move: when the U.S. government is unwilling to directly launch a central bank digital currency (CBDC), a compliant stablecoin backed by a political family, a “semi-official digital dollar”, may be the most feasible real-world alternative.

The Design Philosophy of USD1: Not Radical, Not Decentralized, but Highly Strategic

WLFI has explicitly stated on multiple public occasions that USD1 is not a typical Web3 product. It does not employ algorithmic mechanisms, does not introduce complex yield structures, and is not targeted at retail investors. Instead, it is designed to serve the on-chain transaction and settlement needs of large institutions, multinational corporations, and sovereign funds. This “restrained design” reflects a clear strategic focus on “financial instrument thinking” in a market where stablecoins are fiercely competing for liquidity, yield, and innovation.

Additionally, USD1’s technical design avoids new blockchains (such as Solana, Sui, and Aptos), opting instead for deployment on the two major mainstream networks, Ethereum and BSC, to ensure technical stability and asset interoperability. Combined with standard compliance tools such as BitGo custody, Chainlink PoR transparency mechanisms, and Peckshield smart contract audits, USD1 is fully integrated into a “regulatable, auditable, and integrable” on-chain financial infrastructure.

3. A Comprehensive Explanation of the USD1 Product Mechanism

As a stablecoin emphasizing compliance, stability, and transparency, USD1 adopts an extremely restrained yet systematic approach in its product mechanism design. It avoids any innovative yield-generating structures and algorithmic stabilization mechanisms, instead fully aligning with the “currency substitute” standards of traditional financial frameworks. From its underlying asset composition to its on-chain performance, USD1 seeks to establish itself as a “trustworthy digital dollar”. The following is an in-depth analysis of its core product mechanism dimensions:

3.1 Reserve Mechanism and Asset Composition: 100% Backed Assets + Strong Audit Framework

USD1 adheres to a fully asset-backed mechanism, with its reserve assets mainly consisting of:

• Short-term U.S. Treasury Bills (T-Bills): Highly liquid and top-rated, these are the lowest-risk fixed-income assets in the market.
• U.S. dollar bank deposits: Held in custody by regulated financial institutions, connecting to the off-chain financial system.
• Cash equivalents: Including money market funds and government-guaranteed bills, used for short-term liquidity management.

The custody of reserve assets is managed by BitGo. This is a U.S.-based compliant cryptocurrency custody company with SOC 2 Type II certification and a Wyoming Trust License, providing custody services for large cryptocurrency funds such as Galaxy Digital and Pantera. BitGo employs the multi-signature (multi-sig) system with geographically distributed signers to effectively prevent single-point attacks and internal misconduct.

In addition, USD1 has introduced Chainlink’s Proof of Reserve (PoR) mechanism, allowing on-chain users to verify the actual reserve status of USD1 in real time, a feature that has been long absent in projects like Tether (USDT). WLFI has also committed to introducing independent third-party audits and publishing reserve reports on a quarterly basis. Looking ahead, it plans to integrate on-chain zero-knowledge audit modules to further enhance the credibility of the information.

This mechanism is particularly important for institutional users, as it not only enhances transparency but also converts “reserve” into “verifiable trust”.

3.2 On-Chain Deployment and Smart Contract Security

USD1 is deployed on two major public chains: Ethereum and Binance Smart Chain (BSC):

• Ethereum, as the main battlefield for DeFi, possesses strong ecosystem connectivity and high security.
• BSC has low transaction fees and high TPS, making it suitable for high-frequency trading and payment scenarios.

The smart contract was audited by the security company Peckshield. According to the report submitted by Peckshield, the USD1 contract’s core design “did not reveal any high-risk vulnerabilities”, and all call paths remain within the scope of permission control, complying with general security best practices.

The contract’s functionality is relatively concise and only includes:

• Mint/Burn (controlled by WLFI custodian)
• Query/Transfer/Authorize
• PoR status read interface
• Blacklist/Whitelist mechanisms (for compliance control)

The contract design of USD1 adopts a “subtractive” approach, aiming for stability and verifiability rather than diversified innovation.

3.3 Target Users and Use Cases: Digital Dollar Exclusively for Institutions

Unlike most stablecoins in the market, USD1 is explicitly not issued to retail users, but instead focuses on three types of business use cases:

1. Cross-border clearing and settlement
   USD1’s primary function is to serve as an alternative to clearing networks such as SWIFT and Fedwire. It provides a low-cost channel for dollar-denominated transfers, particularly in regions facing dollar shortages, such as South America and the Middle East.
2. The fundamental value anchor of DeFi protocols
   WLFI is currently in discussions with several DeFi protocols, including Aave, Ondo Finance, and Chainlink, to integrate USD1 into their liquidity pools, collateral structures, and on-chain payment systems.
3. Digital dollar accounts for sovereign funds and mega-institutions
   It has been reported that MGX, a Middle Eastern sovereign wealth fund, has signed an agreement with WLFI, planning to use USD1 as the payment medium for its USD 2 billion investment in Binance.
   This institution-first, structurally restrained design positions USD1 as a combination of “USD version of USDC + Euroclear”.

USD1 Product Mechanism Diagram (Image source: Max, Gate Learn writer)

4. Compliance Strategy and Political Escort

In today’s stablecoin market, “compliance” is no longer merely an added value for products but has become a prerequisite for survival. Following the collapse of Terra and the downfall of FTX, global regulators have begun to exert unprecedented pressure on stablecoin projects. The launch of USD1 comes at an opportune time—it is not an “offshore asset” operating in a gray area, but rather a “compliant stablecoin” backed by political legitimacy and prioritizing regulatory coordination. This marks a critical turning point in the evolution of stablecoins, shifting them from marginal innovation to integration within political structures.

4.1 A Historical Regulatory Inflection Point for USD Stablecoins

Since Facebook’s (now Meta) 2019 Libra proposal, U.S. regulators have steadily tightened oversight of the “digital dollar”. While projects like USDT and USDC have achieved global market dominance, they still face challenges regarding regulatory legitimacy:

• Tether (USDT) has long faced criticism for its lack of audit transparency and unclear reserve composition, operating on the margins of regulatory scrutiny for an extended period.
• Circle (USDC) has actively sought compliance, but its reliance on the banking system constrains its market flexibility.

In 2025, the U.S. Congress began to accelerate the legislation of Stablecoin National Innovation Act, aiming to establish a clear regulatory framework and grant qualifying stablecoin projects legal status akin to that of traditional banks.
USD1 arrives precisely at this pivotal moment of policy transformation.

4.2 USD1’s Compliance Strategy: The In-System Stablecoin Path

WLFI’s design of USD1 is not technology-first but regulation-first, as reflected in the following key points:

• Select BitGo as the custodian, which has a U.S. trust license and is subject to US regulations.
• Reserve assets are clearly defined as U.S. Treasury bonds and bank deposits, and do not involve high-risk, high-yield assets.
• No retail exchange services are offered, avoiding consumer-end risks such as large-scale money laundering and compliance arbitrage.
• Chainlink Proof of Reserve (PoR) is introduced to enable on-chain auditing and enhance transparency.
• Work with audit institutions to publish quarterly reports and proactively comply with regulatory disclosure standards.

In addition, USD1 does not rely on offshore trust structures and is not registered or operated in Seychelles, Singapore, or the Cayman Islands. Instead, it is subject to regulatory filing under the U.S. domestic framework. There are even rumors that it may seek to become a “nationally designated stablecoin service provider” in the future.

Political Escort: Regulatory Bias or Conflict of Interest?

The most controversial aspect lies in whether the Trump family’s deep involvement could lead to regulatory bias or even potential conflicts of interest.

• On March 13, 2025, the Senate Banking Committee successfully passed the Stablecoin National Innovation Act, which some analysts believe was closely related to the presidential family’s promotion of stablecoin projects.
• The public questioned whether Trump was acting as “both referee and player”, especially given the capital flows between WLFI and his family entities.
• Political opponents and some government ethics organizations have criticized USD1 as “an extension of a family business empire under the guise of state power”.

However, some argue that it is precisely this “national endorsement” that gives USD1 its unique sense of system security and regulatory certainty. In the current stage where the “legalization of stablecoins” has not yet been fully completed, this political backing actually provides a tangible institutional advantage.

4.4 The Significance of Compliance: From Risk Mitigation to Institutional Embedding

USD1’s compliance strategy is not merely a tool for risk mitigation; it represents a new institutional embedding path:

• It seeks to steer dollar-pegged stablecoins from “regulatory exemption” to “regulatory recognition”.
• It transforms stablecoins into a “digital dollar interface” that can be integrated by central banks, sovereign funds, and traditional financial institutions.
• It establishes a stablecoin framework that does not rely on algorithms or appeal to retail investors, but is highly compatible with institutional logic and regulatory systems.

This compliance strategy may signal that the mainstream development path for stablecoins in the future will no longer be “technology-driven”, but rather a combination of “institutional orientation” and “financial linkage”.

5. A Comprehensive Comparison of Stablecoin Markets: USD1 vs USDT/USDC/DAI/FDUSD

Although the core logic of stablecoins is “value pegging”, different projects vary significantly in terms of reserve structure, issuance mechanisms, compliance pathways, target markets, and other aspects. The emergence of USD1 has disrupted the long-standing duopoly of USDT and USDC in the stablecoin market, sparking renewed scrutiny over “what constitutes the next-generation mainstream stablecoin”.

This section will systematically compare USD1 with the top-ranked stablecoins by current market capitalization—Tether (USDT), Circle (USDC), DAI of MakerDAO (later renamed as SKY), and HSBC-backed FDUSD—exploring their positioning and evolutionary paths within the stablecoin ecosystem.

5.1 Reserve Mechanisms and Transparency: From “Shadow Assets” to Auditable Models

Stablecoin Reserve Model and Transparency Comparison Table (Source: Max, Gate Learn writer)

USD1’s “traditionalist” asset structure reinforces its advantages in terms of security and audit transparency. Unlike Tether, which has long obscured its asset composition, USD1 aligns more closely with the “open paradigm” of USDC or FDUSD.

5.2 Compliance Level and Regulatory Interaction

Stablecoin Compliance Comparison Table (Source: Max, Gate Learn writer)

USD1’s regulatory embeddedness has brought it unprecedented policy dividends, but it may also raise concerns about “moral hazard”—will regulation favor family projects?

5.3 Market Positioning and User Path

Stablecoin Market Positioning Comparison Table (Source: Max, Gate Learn writer)

USD1 is currently in the “early liquidity cold start” phase, with ecosystem integration not yet as developed as that of more mature stablecoins. However, its target market is highly concentrated in bulk settlements and institutional deployments, representing a differentiated development path.

5.4 Technical Architecture and Smart Contract Mechanism

Stablecoin Technology Architecture Comparison Table (Source: Max, Gate Learn writer)

USD1 employs a “minimalist + high-permission control” approach in its smart contract architecture, making it more suitable for deployment by large institutions or sovereign users rather than retail customers.

5.5 Comparison of Future Growth Engines and Challenges

Stablecoin Future Development Comparison Table (Source: Max, Gate Learn writer)

USD1 could potentially become a strategic stablecoin in the future stablecoin landscape if it successfully leverages its compliant structure and political advantages to achieve widespread adoption among global institutions. However, this process heavily relies on sustained policy support and the establishment of market trust.

6. Ecological Construction and Potential Breakthroughs

USD1’s ecological strategy is not a broad and expansive approach that is “accessible to everyone”, but rather a small and stable strategy that is “controllable by institutions”. This strategy determines that it must accurately target key ecological niches, rather than relying on generalized traffic or network diffusion.

Strategic Collaboration: Prioritizing Depth Over Breadth

At the current stage, USD1’s ecological layout is more like the precise embedding of “specific institutional nodes”—Aave lending collateral, Chainlink reserve verification, Ondo financial products, BitGo custody and trading interfaces. While these collaborations may appear fragmented, they are in fact aligned around a core objective: building a closed-loop stablecoin operating framework for institutions, rather than aiming for blanket coverage of every on-chain use case.

This approach differs from USDT’s transaction-first horizontal expansion and from DAI’s DeFi-native extension. Instead, it focuses on vertical depth through a “trusted closed loop”.

6.2 Architecture: Built for “Interoperability”, Not “Innovation”

USD1 adopts an extremely restrained approach in its smart contract design, avoiding common DeFi features such as “yield farming” or “algorithmic minting”. Its contract function is more like an API, serving as a standardized, secure, and controllable settlement module for the upper structure. While this functional limitation may seem to lack imagination, it is actually to prevent “incompatibility” in ecological connections. In the institutional interactions spanning multiple chains, cross-chains, and cross-organizations, the role of stablecoins is not to be complex, but to remain predictable.

6.3 Can Cross-Border Cooperation Really Trigger Network Effects?

Although USD1 has already been adopted by sovereign funds such as MGX, it is still far from the “network effect”. The main problem is that its users are not native to the crypto ecosystem, but rather a limited set of “permitted parties” within the regulatory trust chain. This makes USD1 prone to becoming an “efficiency island”: compliant, secure, yet difficult to circulate widely.

Unless USD1 can enter at least one mainstream platform with real daily liquidity (such as Coinbase, Stripe, Visa, Paypal), its role as a bridge between DeFi and TradFi will remain a structural design rather than a market reality.

7. Challenges and Variables: Uncertainties in USD1’s Growth Path

1. Relatively long trust-building cycle: Unlike Tether’s “use first, audit later” market approach, USD1 follows a “audit first, use later” model, which may cause a lack of momentum in the early stages of use.
2. Limited acceptance by exchanges and protocols: If USD1 fails to secure trading pairs on the top ten exchanges or establish itself as a core stablecoin in major DeFi protocols, its ecosystem expansion could face significant bottlenecks.
3. Political risk spillover: The deep involvement of the Trump family can be both a driver and a hindrance, particularly amid regime changes or shifts in foreign policy.
4. Compatibility issues in the DeFi world: While the permissioned minting and blacklist mechanisms meet regulatory requirements, they conflict with the principle of decentralization.

8. Conclusion: The Future of Stablecoins—Exploring the Tension Between Nationalization and Marketization Through USD1

USD1 represents an “institutional reconstruction attempt” in the history of stablecoins. It does not start from technology, but from governance structure, financial logic and political resources, aiming to “semi-privatize” the global issuance rights of the U.S. dollar.

It may become a forerunner of “nationalized stablecoins”, or it may stagnate due to trust barriers, liquidity deadlocks or regulatory games. Regardless of the outcome, USD1 has made us reconsider a fundamental question: “In the era of digital currency, what is the most effective digital form of the U.S. dollar? Is it a free currency for anonymous transactions? Is it a decentralized asset for on-chain governance? Or is it a stable protocol acquiesced by the state and privately executed?”

Technical issues are for technology, regulatory issues are for regulation. Yet USD1’s ultimate fate may still depend on whether users are willing to believe that a “White House-backed” project can act as a neutral force in Web3.