Former U.S. President Donald Trump’s much-anticipated decentralised finance (DeFi) venture, World Liberty Financial, is gradually taking shape. This week, the company made a significant move by submitting a proposal to the Ethereum-based DeFi platform, Aave, outlining their intent to utilise Aave's infrastructure for their crypto initiative.
The proposal suggests that World Liberty will operate as a dedicated instance on Aave, using the platform's existing protocol to deliver its services. In exchange, AaveDAO—Aave’s governance community—would receive 20% of protocol fees generated by World Liberty, along with 7% of WLFI, the new project's governance token.
AaveDAO’s Role in the Plan
A notable point of discussion is the token distribution. While initially described as "non-transferable," the WLFI tokens are now set to be distributed to users who engage with World Liberty’s liquidity pools.
However, the mechanics of how AaveDAO will manage WLFI tokens, given their non-transferable nature, remains uncertain. Representatives from World Liberty Financial have not yet provided clarification on this issue.
The AaveDAO community is now tasked with evaluating the proposal, which will determine whether Trump’s DeFi project can proceed on the platform. If approved, WLFI token holders will also need to vote on the matter separately.
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Initial Token Offerings and Liquidity Focus
The proposal outlines that World Liberty will initially accept deposits in Ethereum (ETH), Wrapped Bitcoin (WBTC), and stablecoins such as USDC and USDT. The primary aim will be to provide stablecoin liquidity for ETH and WBTC markets, with a focus on attracting users who may be familiar with the Trump brand but lack experience in decentralised finance.
World Liberty’s team, including Trump’s sons Eric and Don Jr., and fellow businessman Steve Witkoff, announced the project last month. It plans to offer borrowing and lending services on Ethereum, similar to existing DeFi applications like Aave.
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A More “User-Friendly” Alternative
World Liberty is positioning itself as a more approachable option for newcomers to DeFi. Its pitch to AaveDAO emphasised the potential to draw new users and liquidity to Aave, arguing that the project could simplify the often complex world of decentralised finance.
Much remains uncertain about the platform, particularly its operation and regulatory framework. Last month, World Liberty opened whitelists for accredited investors in the U.S. to purchase WLFI tokens.
These tokens are being sold under an SEC rule that limits participation to those with significant financial means or knowledge, reducing potential risk.
Potential Legal and Regulatory Issues
While the project’s team confirmed that the proposed Aave instance would be accessible to all Aave users, including Americans, this poses a potential legal risk. Other DeFi platforms based in the U.S., such as Uniswap, have faced scrutiny from the SEC, with threats of legal action over the offering of unregistered securities.
World Liberty Financial’s ambitious DeFi project faces both opportunities and challenges. While it seeks to bring new users into the DeFi space by collaborating with Aave, questions remain about its operational model and regulatory compliance.
Given the current climate surrounding DeFi protocols in the U.S., this project could face significant hurdles before gaining widespread acceptance.
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