The Rise of USD1: How Trump-Backed Stablecoin Could Disrupt USDT and Reshape Institutional Crypto Infrastructure

The stablecoin market in 2025 is undergoing a seismic shift, driven by regulatory clarity and institutional demand for compliance-first digital assets. At the forefront of this transformation is USD1, a Trump-backed stablecoin issued by World Liberty Financial. Backed by U.S. Treasuries and governed by the GENIUS Act, USD1 is positioning itself as a direct competitor to Tether's USDT, leveraging regulatory alignment and institutional partnerships to redefine the crypto infrastructure landscape.

Regulatory Alignment: The GENIUS Act as a Catalyst

The GENIUS Act, signed into law in July 2025, has created a federal framework that mandates stablecoins to maintain 1:1 reserve backing with low-risk assets like U.S. dollars and short-term Treasuries. This legislation requires monthly reserve disclosures, third-party audits, and CEO/CFO certifications, ensuring transparency and trust. Unlike USDT, which has faced scrutiny for its opaque reserve composition-including secured loans and Bitcoin- USD1's conservative backing by U.S. Government Money Market Funds aligns it with the highest regulatory standards.

This alignment has made USD1 a preferred choice for institutions wary of regulatory risks. For example, the Brookings Institution notes that the GENIUS Act's restrictions on stablecoin issuance to federally or state-regulated entities have narrowed legal grey areas, giving USD1 a competitive edge over USDT, which is issued by Tether Limited, a company based in El Salvador. By adhering to U.S. regulatory norms, USD1 avoids the cross-border compliance challenges that plague USDT, making it a safer bet for institutional adoption.

Institutional Adoption: Infrastructure and Partnerships

USD1's institutional appeal is further bolstered by its infrastructure partnerships and zero-fee model. The stablecoin is built on a Stablecoin-as-a-Service framework developed by BitGo, a custodian with a national bank charter from the U.S. Office of the Comptroller of the Currency (OCC). BitGo's role as both custodian and infrastructure provider ensures secure, compliant operations, with plans to expand USD1 to Ethereum and Binance Smart Chain blockchains. This infrastructure has attracted corporate treasuries and financial institutions seeking a programmable, interoperable asset for cross-border settlements.

In contrast, USDT's infrastructure, while deeply integrated into traditional finance, relies on a high-volume, fast-settling model optimized for retail users. USD1's focus on institutional-grade transparency-such as its points-based reward system to incentivize long-term holding- positions it as a more tailored solution for corporate treasuries and payment processors. For instance, USD1's partnership with Gate has expanded its utility in cross-border trade and remittances, while its zero-fee model has driven a 300% increase in daily active users since launch.

Reshaping Institutional Crypto Infrastructure

The broader implications of USD1's rise extend beyond stablecoin competition. By operating under the GENIUS Act, USD1 is helping to normalize tokenized cash as a core component of institutional infrastructure. According to a McKinsey report, stablecoins now account for 30% of all on-chain crypto transaction volume, with USD1 contributing to a $4 trillion annual volume in 2025. This growth is driven by institutions seeking faster, cheaper, and more transparent alternatives to traditional payment systems.

Moreover, USD1's compliance-first approach aligns with global regulatory trends, such as the EU's MiCAR and Hong Kong's Stablecoins Bill, which prioritize investor protection and financial stability. This alignment has enabled USD1 to secure regulatory approvals in Germany and Dubai, facilitating its global expansion. In contrast, USDT's regulatory uncertainty-stemming from its opaque reserves and offshore structure- has limited its appeal to institutions prioritizing compliance.

Investment Potential: A New Paradigm

For investors, USD1 represents a unique opportunity to capitalize on the convergence of regulatory clarity and institutional demand. Its $3.3 billion circulation within a year and strategic partnerships with BitGo and Gate underscore its scalability. Meanwhile, the GENIUS Act's 18-month timeline for imposing capital and liquidity requirements on stablecoin issuers ensures that USD1's infrastructure remains resilient to systemic risks, a critical factor for long-term institutional trust.

In contrast, USDT's dominance is increasingly challenged by its regulatory vulnerabilities. While it retains a $127 billion market cap, its reliance on non-traditional reserves and lack of U.S. regulatory alignment make it a riskier proposition for institutions. USD1's zero-fee model and compliance-driven design position it to capture market share in sectors like e-commerce, DeFi, and corporate treasury management.

Conclusion

USD1's emergence as a Trump-backed stablecoin is not merely a product of political influence but a reflection of the market's demand for regulatory clarity and institutional-grade infrastructure. By aligning with the GENIUS Act and leveraging partnerships with regulated entities like BitGo, USD1 is redefining the stablecoin landscape. For investors, this represents a compelling case study in how regulatory alignment can catalyze institutional adoption and reshape crypto infrastructure. As the stablecoin market matures, USD1's compliance-first approach may well set the standard for the next generation of digital assets.