WLFI’s Centralized Move Undermines Decentralization Claims

World Liberty Financial (WLFI) has taken a controversial step by blacklisting the wallet associated with cryptocurrency entrepreneur Justin Sun, freezing approximately 2.94 billion tokens—valued at around $552 million—as part of an effort to stabilize the token’s value amid significant price volatility. The move has sparked debate about decentralization in the crypto space and raised concerns over tokenholder rights and governance practices.

According to on-chain data, the freeze includes 540 million unlocked WLFI tokens valued at roughly $101 million and 2.4 billion staked tokens, which are tied to Sun’s holdings. The action followed transfers of approximately $9 million worth of WLFI tokens to exchanges, triggering a response from WLFI’s core team. In a statement, Sun denied engaging in selling activities, claiming the transactions were limited to “exchange deposit tests” and did not impact the market. However, the WLFI team proceeded with the freeze, citing concerns over potential price manipulation.

The blacklisting of Sun’s wallet has had a mixed effect on the token’s price. WLFI initially rebounded, rising above $0.18 following the freeze, but has since faced renewed volatility, with a 40% decline from its launch price of $0.46 on September 1. At the time of the token’s launch, insider selling—particularly on exchanges like Binance and OKX—led to a sharp drop in value. The project’s governance model, which allocates 56% of the token supply to insiders and 22.5 billion tokens to entities linked to the Trump family, has drawn criticism for being overly centralized.

Sun’s involvement in WLFI is significant. He invested $75 million in the project and was named an advisor. According to Arkham Intelligence, he held nearly $900 million in WLFI before the freeze, making him one of the largest stakeholders outside the Trump family. The freeze has effectively sidelined Sun, who had previously stated he had “no intention to sell” his unlocked tokens. The move underscores the power of WLFI’s core team in managing token economics, even at the expense of its high-profile backers.

The freeze also raises questions about the governance framework of WLFI. The token is marketed as part of a decentralized platform, yet key decisions, such as blacklisting wallets, are made unilaterally by the project’s leadership. While token holders have voting rights through a Snapshot-based system, these rights are capped at 5% per wallet. The governance model is managed by a Delaware-based non-stock corporation, not a decentralized autonomous organization (DAO), and decisions are executed via a multisignature wallet controlled by the team. This has led to skepticism among investors, who now question whether WLFI’s decentralization claims are genuine.

Critics argue that the ability to blacklist addresses compromises the principles of decentralization and introduces governance risks. While such functions are often justified as security measures—designed to prevent hacking, fraud, or regulatory violations—they also highlight the centralized authority retained by project teams. In WLFI’s case, the freeze of Sun’s wallet has demonstrated that even influential stakeholders are not immune to administrative actions.

The incident has also drawn regulatory attention, particularly given the political ties of WLFI. The Trump family controls a significant portion of the token supply, and the project’s association with U.S. political figures may invite closer scrutiny from regulators. The freeze of Sun’s wallet, coupled with ongoing legal challenges involving the Tron founder, could further complicate the project’s regulatory outlook.

Looking ahead, the WLFI team has not yet indicated whether the freeze on Sun’s tokens will be lifted. The project has previously used token burns to stabilize the market, and further interventions may follow if the team determines additional measures are necessary. Investors remain cautious, with some seeing the volatility as an opportunity while others express concerns about the long-term viability of the token. As WLFI moves forward, its ability to balance governance transparency with market stability will be a key factor in determining its success.

Source:

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