Trump's stablecoin "goes public": WLFI applies for national bank license, directly challenging USDT dominance

By World Liberty Financial (WLFI), related to U.S. President Donald Trump, officially submitted an application on January 7th to obtain a nationwide trust bank license to establish the “World Liberty Trust Company.” The core mission of this entity is to regulate its flagship product—the USD1 stablecoin, with a circulation volume exceeding $3.3 billion and covering 10 blockchain networks.

This move appears to be a routine compliance upgrade on the surface, but in reality, it is a carefully strategized bet: WLFI predicts that stablecoins are transforming from speculative “dollar chips” into a regulated settlement infrastructure that mainstream financial institutions can adopt. This is not only about the fate of a single company but could also be a key step in reshaping the stablecoin market landscape and defining future industry rules where “compliance as a moat” becomes the norm.

The Strategic Game Behind the License: Why a “Narrow Bank”?

On the surface, WLFI’s application for a bank license seems like a standard move to enhance institutional credibility, especially given its close ties to Trump, which could be seen as a PR response to public scrutiny. However, a deeper analysis of its application for a “trust bank” license reveals a more sophisticated and forward-looking business vision. It is not aiming to become a traditional commercial bank that accepts deposits and issues loans, but rather a “narrow bank” focused on asset custody and trust services.

This architecture aligns precisely with the ideal stablecoin model: 100% reserve-backed, redeemable at any time, primarily used for payments rather than leverage trading. By obtaining a nationwide trust bank license, WLFI can place the issuance, custody, and reserve management of USD1 entirely under the supervision of a single federal regulator (such as the OCC). This means the entire operation will be governed within a bank-level framework of oversight, review, and risk control, without engaging in complex lending activities. Zach Witkoff, the proposed President and Chairman, confirms this approach: “Institutions are already using USD1 in cross-border payments, settlement, and fiscal operations. A nationwide trust bank license will enable us to integrate issuance, custody, and exchange into a comprehensive service provided by a highly regulated entity.”

The strategic logic of this move is to compete for three key advantages:

• Boost counterparty confidence, making major exchanges, market makers, and corporate finance departments see USD1 as a safe and reliable “financial pipeline”;
• Achieve vertical integration to increase profits by internalizing custody and operational functions, reducing reliance on third-party service providers and lowering costs, thus establishing a cost advantage in a market with narrowing spreads;
• Lay the groundwork for future access to core payment systems. Although the license does not directly grant a Federal Reserve account, it significantly enhances dialogue eligibility when seeking deeper payment network connections.

Key Information on USD1 Stablecoin and Trust Bank Application

To understand the scale and intent behind WLFI’s move, the following data provides clear anchors:

• Core product: USD1 stablecoin
• Current circulation: Over $3.3 billion
• Network coverage: Deployed on 10 different blockchain networks
• Applicant entity: World Liberty Trust Company
• License type applied for: Nationwide trust bank charter
• Primary goal: To integrate USD1 issuance, custody, redemption, and reserve management under a single federal regulatory framework
• Proposed leader: Zach Witkoff (President and Chairman of the applicant company)
• Strategic positioning: To become a “narrow bank” focused on stablecoin services, not a full-service commercial bank

From Market “Gaps” to Financial “Foundation”: Paradigm Shift in Stablecoins

To fully grasp the foresight of WLFI’s move, one must examine the fundamental transformation in the role of stablecoins within the financial ecosystem. Historically, stablecoins have largely been a clever exploitation of “market gaps.” They provide a dollar-like instrument that can circulate 24/7 across global networks without touching the slow traditional banking system at every node. This “off-system” characteristic was key to their explosive growth in early crypto markets but also kept them in regulatory gray areas—serving DeFi protocols and offshore exchanges but often rejected by mainstream payment networks and corporate balance sheets due to high uncertainty.

By 2025, Washington began formalizing stablecoin regulations, fundamentally changing this dynamic. Regardless of political opinions surrounding Trump-related projects, the regulatory shift has a direct market effect: once a federal framework is established, the regulatory status itself becomes a product feature endorsed by institutions. If stablecoins are to support real economic activities—such as payroll, cross-border remittances, merchant settlements, or large-scale capital operations—the issuers will need more than monthly attestations and marketing promises; they will need explicit “licenses” from regulators.

Therefore, WLFI’s application for a trust bank license can be seen as a precise positioning for the next growth curve of the industry. It bets that stablecoin adoption is entering a new era. In this phase, market share expansion will depend less on how many trading pairs the issuer can list on decentralized exchanges and more on the thoroughness and credibility of compliance. When assets begin to serve as “financial pipelines,” users prioritize safety and predictability over novelty. A federal license, with its strict controls, mandatory reporting, and regulatory oversight, provides the “boring” security that large financial institutions’ risk committees demand.

Survival Game in the Macro Shift: Interest Rates, Regulation, and Scale

Beyond the micro perspective of a single company, the story of stablecoins is increasingly a macro monetary story cloaked in crypto. The profitability of the industry is closely tied to the interest rate environment. When short-term rates are high, stablecoin reserves invested in short-term government bonds generate substantial returns, which can subsidize growth and user incentives. When rates decline, this easy income shrinks, forcing issuers into more brutal competition in distribution and utility.

Regardless of the interest rate scenario, scale is crucial. The stablecoin market has grown large enough that reserve management is no longer a secondary detail but a core business itself. This explains why regulation is rapidly evolving into a form of economic moat. In a high-rate environment, mediocre issuers can still burn money to attract users; but in a low-rate environment, the long-term winners will be those with the broadest acceptance and lowest compliance costs. They can operate with thinner margins without losing user trust or banking channels.

Current market expectations suggest that interest rates may ease in 2026. WLFI’s pursuit of a trust bank license can be viewed as a strategic hedge—preparing for future competition: when “simply increasing incentives” becomes unsustainable, the focus shifts to structural efficiency and regulatory clarity. This timing also aligns with the evolving landscape of stablecoin competition. For years, the market has been dominated by Tether’s USDT (leading offshore liquidity) and Circle’s USDC (positioned as a “semi-regulated” US option). However, the next wave is changing: banks, custodians, and regulated infrastructure providers are repositioning stablecoins as “settlement layers.” This trend raises the entry barriers for all issuers. As existing financial giants begin integrating stablecoin settlement, they will naturally prefer counterparties with clear regulatory status, robust controls, and transparent audits.

The Night Before the Reshaping: Who Will Guard the “Compliance Gate” of Crypto Wealth?

WLFI’s bank license application is like trying to gain entry into the “issuer club” before the industry’s gate narrows further. Its profound significance lies in potentially elevating the competition dimension within the stablecoin industry. The future battlefield will not only be about technological performance, ecosystem partnerships, or marketing volume but also about the accumulation and exchange of regulatory capital.

For other stablecoin issuers—especially those with huge circulation but relatively vague regulatory frameworks—WLFI’s move creates direct pressure. It sets a new benchmark: what qualifies as a “fully regulated” stablecoin service capable of serving mainstream financial institutions? If WLFI succeeds in obtaining the license and gains more institutional business, it could trigger an industry-wide “license race,” accelerating the integration of stablecoin issuers into traditional financial regulatory systems.

For the entire crypto industry, this trend has a dual nature. On one hand, mainstream financial institutions adopting regulated stablecoins will bring massive compliant capital and unprecedented application scenarios, marking a maturation of the industry. On the other hand, “compliance as a barrier” may lead to increased market concentration, posing greater challenges for smaller or highly decentralized stablecoin projects. Ultimately, WLFI’s “compliance race” is not only about whether it can secure a favorable position in the next-generation stablecoin landscape but also about exploring the path forward: how to balance embracing regulation with maintaining innovation vitality.

Understanding the Federal Trust Bank and Stablecoin Regulation Progress

Concept Explanation: What is a Federal Trust Bank?

A “federal trust bank” is a special category within the U.S. banking system, licensed and regulated by the Office of the Comptroller of the Currency (OCC). Its core business is to perform trust responsibilities, focusing on asset custody, wealth management, estate planning, securities services, and other fiduciary activities, rather than traditional deposit and loan operations. Hence, it is called a “narrow bank.” For WLFI, choosing this path offers the advantage of gaining high credibility and clear federal oversight as a “bank,” while avoiding the massive capital requirements, deposit insurance, and complex compliance obligations of a full-service bank. This allows it to concentrate on issuing and custody of stablecoins, obtaining essential regulatory backing in the most economical way.

Background Overview: Stablecoin Regulation Timeline and Future Trends

Stablecoin regulation has not been achieved overnight. The early period (pre-2020) was mainly a “regulatory observation phase,” with unclear responsibilities and relying on issuers’ self-promises. The development phase (2020-2024) saw parallel state-level regulation and federal proposals, with frameworks like New York’s BitLicense becoming benchmarks. Several federal legislative drafts were introduced but not passed, leading to market expansion amid uncertainty. The turning point (from 2025 onward) is the formation of a “federal framework,” with bipartisan support increasing the likelihood of clear federal stablecoin regulation laws. These laws would require issuers to be insured depository institutions or obtain specific licenses. WLFI’s application is a proactive response to this trend, aiming to seize the opportunity before final rules are enacted. Its success or failure will set a critical precedent for all similar future applications.