World Liberty Financial, a crypto venture linked to President Donald Trump's family, has filed an application with the U.S. Office of the Comptroller of the Currency to form a national trust bank.
The proposal seeks to place its USD1 stablecoin under direct federal supervision in a regulatory category that has admitted only one other crypto-native firm to date.
If approved, the proposed entity named as World Liberty Trust Company, will be allowed to “take over the issuance and redemption of USD1, offer conversion services from other major stablecoins into USD1, offer custody services for fiat and major stablecoins, and perform the reserve management for the assets backing outstanding USD1,” Mack McCain, general counsel of World Liberty Financial, and proposed trust officer for WLTC, overseeing fiduciary operations, told Decrypt.
Stablecoins are cryptocurrencies designed to track the value of a reference asset, most commonly the U.S. dollar, and in some cases other currencies or commodities, to enable price-stable digital payments and settlement.
“We want to do all of this in a highly regulated, transparent manner,” McCain added.
Still, national trust bank charters are rare, particularly for crypto firms.
That sets a high bar for other entities seeking to apply and indicates that the OCC has, to date, treated crypto-native trust banks as exceptions to the status quo.
Unlike recent efforts by fintech companies such as PayPal to establish state-level deposit-taking banks, World Liberty’s filing targets a trust charter that would allow custody and settlement functions without lending or insured deposits.
A needed upgradeWorld Liberty’s prospects for the charter appear to be a “structural upgrade” that advances its stablecoin from being “a trading instrument to a settlement instrument,” Chris Loeffler, CEO of Nasdaq-listed digital asset management platform Caliber, told Decrypt.
“As more people and institutions utilize digital currencies to transact, those transactions need an ability to be settled between parties without the risk of the currency being used fluctuating in value, and this charter offers a federally regulated structure to make that possible,” Loeffler said.
Stablecoin issuers like World Liberty use a structure designed for state-licensed entities, but those “have regulatory friction between the states, and a partnership with an existing financial institution,” he explained, adding that such a condition “reduces the profitability of the issuer and introduces counterparty risk.”
“Neither of these is very appealing for a stablecoin issuer seeking to become ubiquitous with the infrastructure needed for more of TradFi to do business in the world of DeFi,” Loeffler noted.
The move could also be “a signal to what direction stablecoin legislation and regulation also goes in,” he said. “It will be a niche option to the extent that the federal government meters out how many of these charters can be obtained.”
