QUESTION
In the last few weeks, you have been dealing with the controversial subject of cryptocurrency and the GENIUS Act regarding its impact on mortgage banking. I have been worrying about something since the legitimization of cryptocurrency started.
I am probably the least likely to bring up my concerns about it since I am the CEO of a large lender that would definitely make thousands of mortgage loans if crypto can be used in the loan transaction. But I do not want to originate unstable mortgages!
I'm not a fool, and I do not want to originate loans based on the modern equivalent of Fool's Gold.
I sense there is a rat in this stablecoin initiative. And, like so many other things in our government, I think that rat may be people who are going to get superrich, and especially the president of the United States. By the way, I am not a Democrat. I have voted Republican my whole life. I'm sure both Democrats and Republicans are also going to make significant profits in crypto transactions.
My spider-sense is telling me this is all more than a stablecoin solution to a problem that, as far as I can tell, doesn't exist. I am concerned about politicians profiting at the risk of mortgage lenders. So, I am hoping you could tell us your view of how President Trump and other politicians will benefit financially in the stablecoin era.
How can the President and other politicians benefit personally from the GENIUS Act?
SOLUTION
Compliance Management SystemSecond Line of Defense
RESPONSE
In the huge response I have gotten to my recent articles on cryptocurrency and the GENIUS Act – respectively, Cryptocurrency: Risks to Mortgage Banking and GENIUS Act: Mortgage Banking Ambush – several commenters frame their concerns as "controversial." My view, though, is that controversy can be a fearful way to avoid truth. We should stay calm, not get angry, and rationally evaluate an issue.
Thomas Carlyle paraphrased the Buddha when he said
In a controversy, the instant we feel anger, we have already ceased striving for the truth and have begun striving for ourselves.
Ultimately, the essence of disputes and our reactions to them can be understood better when we emphasize the importance of seeking truth over personal gain. Thus, I am not concerned about controversy because I strive to resolve issues in a clear, unbiased, factual, and rational way.
Politicians of both parties seem to be quite bewitched by digital assets in general, and stablecoins in particular. Indeed, one hundred Democrats in the House voted for the Genius Act, many in the Democratic Party leadership. And in the Senate, eighteen Democrats voted for it. Virtually all the Republicans voted for the Genius Act in the House and Senate.[i]
I can't blame you for being skeptical of the crypto legislation. However, as I stated in my previous articles, there are several positive and negative aspects to consider. That said, unfortunately, some persons may stand to benefit financially. Just like on Wall Street, sometimes insiders can exploit financial opportunities. Congress is no exception. There have been several legislative attempts to prohibit congressional members from trading individual stocks and to prevent financial conflicts of interest. The Democrats have introduced each of them, and nearly all Republicans have opposed them. The most recent legislative effort was introduced by Democrats again in May 2025, called the Ban Congressional Stock Trading Act.
I'm not so sure you should single out President Trump for special attention. Perhaps his potential gain from the stablecoin legislation is an example of how a system can lead to undesirable consequences.
Stafford Beer, the British theorist, famously said
The purpose of a system is what it does.
In other words, a system can have unintended consequences, it can have undesirable consequences, and just relying on its stated goals can be misleading because rhetoric and intentions may be outweighed by actual behavior and outcomes.
So, considering the president's potential to profit from the stablecoins legislation is a way to look at how some politicians may benefit personally from it. Of course, I am not suggesting some nefarious scheme concocted by President Trump. That seems a bit of a stretch.
More to the point, although Mr. Trump's efforts may be seen as offering the American people greater economic stability, perhaps Mr. Trump's personal financial interests regarding stablecoins may also be a template for how politicians could take advantage of this newly enfranchised system. Even then, it does not necessarily follow that all politicians will only act based on their financial interests. That is too cynical. But sometimes people do lose their moral compass.
Just because you can "connect the dots" does not mean that your connections are valid. As is well known, correlation is not causation. The GENIUS Act endeavors to provide a framework to regulate stablecoins. It is certainly not "Fool's Gold," as you state.
Unless a claim of illegality is proven in a court of law, it is best to evaluate the systemic potential and determine if you are comfortable with certain possible outcomes, unintended or otherwise. If you are not comfortable with it, you should contact the appropriate legislator and voice your concerns. Perhaps your view will be considered in future adjustments to the legislation.
I
will answer your question candidly. I would suggest that there are at least
four ways that President Trump and other properly positioned politicians could
personally benefit financially from the cryptocurrency legislation. It doesn't
mean they will; it doesn't mean they will attempt to do so; it only means they
could try to do it. These areas are
(1) personal financial gain through
affiliated ventures,
(2) an increased demand for US debt
and a stronger dollar,
(3) the implementation of the GENIUS
Act, and
(4) the potential for political influence and leverage.
One or more of these factors could apply to politicians who are involved in the digital assets legislation. And, even if that is not the case, some politicians could benefit by copying the stablecoin models forged by others who are using the money-making features of stablecoins. So, let's take a closer look.
PERSONAL GAIN THROUGH AFFILIATED VENTURES
This factor is likely to be the most glaring example of a potential benefit from stablecoins.
· Trump and his family reportedly now have a 40% ownership stake in World Liberty Financial (WLF), a cryptocurrency venture. World Liberty Financial has launched a stablecoin called USD1, pegged to the US dollar. WLF was co-founded by Zach Witkoff, the son of Steve Witkoff, the President's Special Envoy, and Eric Trump, President Trump's son.[ii]
· World Liberty Financial invests the dollars backing USD1 in government bonds and money-market funds, generating revenue without paying interest to USD1 users.
· Currently, USD1 has a circulating supply of 2.19 billion, which represents a market cap of $2.19 billion. As such, with over $2 billion of USD1 in circulation, the company could earn an estimated $80 million annually from these investments.[iii]
· Through his family's stake in World Liberty, Trump stands to profit from increased stablecoin adoption and the associated investment income.
· A business entity linked to Trump, called DT Marks DeFi LLC, reportedly held a 60% stake in World Liberty Financial ($WLF) tokens, receiving 75% of the net revenue generated from future purchases of these tokens. But that stake has been decreasing. It may now be at a 40% stake. I'm not sure anyone knows whether the Trump family profited in the move to a reduced stake.[iv]
o I know it isn't very clear, but WLF represents the project itself, while WLFI is the token used within that project to govern the protocol and interaction with its specific financial features.
o World Liberty Financial's cryptocurrency, WLFI, is a governance token, a type of cryptocurrency that grants its holders the power to participate in the decision-making process of a blockchain project. These tokens are not political and would not be affiliated with a political campaign.
o To put it differently, World Liberty Financial refers to the overall platform and decentralized organization that aims to create a compliant environment, and the token WLFI is the governance and utility token that facilitates operations within the WLF structure. Therefore, $WLF is not exactly the same as WLFI, but they are closely related components of the same project. WLFI tokens are used for voting on decisions related to the WLF protocol and enabling participation in certain features like lending and liquidity.
DEMAND FOR US DEBT AND A STRONGER DOLLAR
A number of commenters to my previous article GENIUS Act: Mortgage Banking Ambush felt that the increased demand for US debt and a stronger dollar could benefit the Trump family's financial holdings in stablecoin tokens and platforms. The GENIUS Act requires stablecoin issuers to back their assets with Treasuries and US dollars.
In theory, this requirement could drive increased demand for US debt and help maintain the US dollar's status as the global reserve currency. While not directly benefiting Trump personally, this strengthens the US economy, a potential political advantage.
IMPLEMENTATION OF THE GENIUS ACT
The GENIUS Act could facilitate the growth of the crypto industry and attract investment. It may provide regulatory clarity for stablecoins, which the Trump administration hopes will attract more digital asset activity to the US and make the country a leader in digital assets. I discussed this promotional element in both my article on the GENIUS Act and my other article Cryptocurrency: Risks to Mortgage Banking.
I'm not so sure the Act provides the clarity needed, while it also presents significant drawbacks to the banking system and mortgage banking. A thriving crypto industry could indirectly benefit those with investments in the sector, including Trump, whose net worth appears to be somewhat tied to cryptocurrency ventures.
POTENTIAL FOR POLITICAL INFLUENCE AND LEVERAGE
In May, Senator Elizabeth Warren (D-MA) outlined fixes that are needed because she was concerned about the potential for "stablecoin corruption." In essence, she raised concerns that the widespread use of a Trump-affiliated stablecoin could allow corporations and foreign governments to potentially influence Trump.
It could be asserted that anyone holding USD1 may be essentially providing Mr. Trump with an interest-free loan because Mr. Trump would make money on the assets backing the stablecoin and pay no interest to the holders of the coin. Critics have said that the use of USD1 could influence Trump's business dealings or "openly pay him for tariff exemptions and other special deals, pardons, or appointments."[v]
These implications seem quite speculative. My outline here is not meant to suggest or infer that Mr. Trump would ever allow himself to be compromised. He seems to be sincerely committed to his view that stablecoin benefits the American people. He was already exceedingly wealthy before he became president. However, in my opinion, there is nothing to stop any politician from jumping on the stablecoin gravy train if Trump’s plans are viewed as blazing a trail to financial opportunities while holding public office. More needs to be done to prevent such conflicts.
Whether or not politicians get corrupted, in theory, a giant corporation hoping to see a prosecution dropped or a license granted could use Mr. Trump's new stablecoin business to create a way to offer a payoff to use his influence in getting a desired economic outcome. We might speculate all day and think of all manner of potential ways to compromise a politician. This is why Article 1, Section 9, of the Constitution[vi] should always be implemented without exception, especially now, as clearly a new form of banking is being inserted into our financial system.
SUMMATION AND COMMENTARY
I want to emphasize that Mr. Trump's potential financial benefits are subject to various factors, including the actual adoption and success of USD1, the stability of the stablecoin market, and the overall trajectory of the cryptocurrency industry.
Mr. Trump’s involvement in the crypto industry has drawn criticism regarding potential conflicts of interest, given his role in shaping the regulatory environment surrounding digital assets. However, unless the Emoluments Clause is strongly enforced with substantial legal consequences, there is little that can be done legally to stop other politicians from using Mr. Trump's stablecoin business model. Indeed, I think it’s quite possible that other politicians may try to find various ways to exploit the stablecoin initiative.
In my opinion, the Trump family’s direct financial interest in World Liberty Financial and its stablecoin, USD1, is problematic. Companies associated with the Trump family hold a significant stake in World Liberty Financial, a crypto venture that launched USD1, the stablecoin pegged to the US dollar. DT Marks DeFi LLC, which is linked to Mr. Trump, holds a substantial stake in WLF Holdco, which controls World Liberty Financial Inc. If USD1 gains wider adoption, this could generate significant revenue for World Liberty Financial through transaction fees and other mechanisms, potentially benefiting Mr. Trump's financial interests.
Also, in my view, there is a concern about the potential for interest-free loans from USD1 holders. The GENIUS Act allows a company issuing a stablecoin (for instance, a company like World Liberty Financial) to constructively receive interest-free loans from those who hold the stablecoin. This would mean that the company can earn interest on the assets backing the stablecoin without paying interest to the holders of the coin.
The GENIUS Act requires stablecoin issuers to back their assets with liquid assets like US dollars and short-term Treasury bills. Pegging the stablecoin to the US dollar could lead to increased demand for US government debt, potentially influencing the value of such investments, which could be relevant given the requirement for stablecoin issuers to hold these assets.
By potentially driving demand for US Treasuries, stablecoins may play a role in ensuring the continued global dominance of the US dollar as the world's reserve currency. Although this would be viewed as a strategic advantage for the US, I think it could be considered a conflict of interest if Mr. Trump personally profits while promoting this trend.
Finally, there's the uncertain outcome of the broader cryptocurrency market and the growth of the digital assets sector. Mr. Trump has actively supported the growth of the crypto and digital asset industry in the US, and, as the industry grows, it might indirectly benefit Mr. Trump's various crypto-related ventures and investments.
Jonathan Foxx, PhD, MBA
Chairman & Managing Director
Lenders Compliance Group
[2]
One of many articles dealing with Trump’s ventures into the new digital
currency is entitled Trump’s Crypto Venture Introduces New Digital Currency,
by David Yaffe-Bellany, on March 25, 2025.
[3]
A good source for valuing the USD1 can be found at Crypto.com.
[4] The
Trump family’s stake in World Liberty Financial is discussed in Trump
family’s company cuts stake in World Liberty Financial by 20% - Report, by
Turner Wright, on June 19, 2025, in Cointelegraph.com.
[5] For
the transcript of Senator Warren’s speech, see On Senate Floor, Warren
Outlines Critical Fixes Needed for Democrats to Support GENIUS Act; Outlines
Concerns on Trump’s Stablecoin Corruption, Senator Elizabeth Warren (Democrat,
Massachusetts), May 5, 2025
[6] In
addition to the Emoluments Clause, see the Domestic Emoluments Clause,
found in Article II, Section 1, Clause 7 of the Constitution, which restricts
the President's compensation to a fixed salary and prohibits them from
receiving any other emolument from the US government.
