The Risks of Trump's Crypto Ambitions and WLF's Bank Charter Bid

The intersection of politics, crypto innovation, and banking regulation has never been more volatile than in 2025. At the center of this storm is World Liberty Financial (WLF), a crypto venture linked to the Trump family, which has submitted a de novo application for a national trust bank charter to the Office of the Comptroller of the Currency (OCC). This move, aimed at legitimizing its USD1 stablecoin as a regulated financial infrastructure tool, has sparked intense debate over systemic risks, regulatory conflicts, and the broader implications for financial stability.

WLF's Charter Bid and the Regulatory Landscape

WLF's application for a national trust bank charter under its subsidiary, World Liberty Trust Company (WLTC), seeks to position USD1-a $3.3 billion circulating stablecoin-as a federally regulated settlement infrastructure for institutional and corporate operations. The company's "narrow banking" model, which avoids traditional lending and deposit-taking, aligns with the framework established by the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) passed in July 2025. This act, a cornerstone of the Trump administration's pro-crypto agenda, provides a federal regulatory structure for stablecoin issuance, enabling entities like WLF to access tools such as "skinny" master accounts at the Federal Reserve.

However, the application has drawn sharp criticism. Senator Elizabeth Warren has called for a halt to the process until potential conflicts of interest are resolved, citing the Trump family's financial ties to WLF and the comptroller of the OCC's presidential appointment. The OCC, led by Comptroller Jonathan Gould, has set a 120-day target for preliminary conditional approvals, but the political sensitivity of WLF's bid raises questions about regulatory impartiality.

Systemic Risks in Crypto-Adjacent Banking

The rapid integration of crypto into traditional banking frameworks, while promising for innovation, introduces systemic risks. According to a report by the Financial Stability Oversight Council (FSOC), the 2025 Annual Report removed cryptocurrency from its list of systemic threats-a reversal attributed to the GENIUS Act's clarity. Yet, experts caution that this optimism may be premature.

Todd Phillips, a former FDIC official, warns that the Trump administration's influence over the OCC could lead to regulatory leniency for WLF, creating an uneven playing field and undermining confidence in the sector. The lack of a centralized regulatory authority for crypto-adjacent banking further exacerbates risks, as highlighted by the American University's Center for Law and Economics: "Regulatory arbitrage and fragmented oversight increase the likelihood of cascading failures" if poorly regulated stablecoins collapse.

Moreover, the expansion of access to Federal Reserve systems for crypto entities like WLF raises concerns about financial stability. Traditional banks have already voiced apprehensions that such access could destabilize the existing banking ecosystem by diverting institutional capital to untested models.

Regulatory Conflicts and Political Influence

The core issue lies in the potential for regulatory capture. The OCC's charter approval process, while ostensibly independent, is subject to political influence given the comptroller's appointment by the president. This dynamic has led to accusations of favoritism, particularly as WLF's application aligns with the Trump administration's broader crypto ambitions.

The recent Senate draft bill, which seeks to assign the CFTC regulatory authority over spot crypto markets, underscores the political fragmentation in oversight. While the bill aims to provide clarity, its stalled progress in the Senate-due to disagreements over anti-money-laundering (AML) provisions and DeFi requirements-reflects the broader regulatory uncertainty.

Conclusion: Balancing Innovation and Stability

WLF's charter bid exemplifies the tension between fostering crypto innovation and safeguarding financial stability. While the GENIUS Act and the OCC's interpretive letters have opened new avenues for digital asset integration, the risks of regulatory capture, systemic instability, and political influence cannot be ignored. Investors must weigh these factors carefully. The Trump administration's pro-crypto stance may drive short-term growth, but the long-term viability of crypto-adjacent banking hinges on robust, impartial oversight.

As the OCC deliberates on WLF's application, the broader industry will watch closely. The outcome could set a precedent for how political interests intersect with financial regulation in the digital age-a test of whether innovation can thrive without compromising stability.