Author: Jack Inabinet, Bankless; Translator: Deng Tong, Golden Finance
Donald Trump may very well be the biggest star to ever launch a crypto token. In addition to the NFT trading card collection, the 47th President of the United States has also released two different tokens for crypto enthusiasts to emulate.
While regulators have released limited information about how they intend to regulate the crypto industry, a closer look at the unique facts and circumstances of Trump’s two tokens could yield important insights into how his administration might apply policy to digital assets.
Today, we’ll unpack the stark differences between WLFI and TRUMP in an attempt to understand how the Trump administration might regulate crypto tokens.
World Liberty Financial is a DeFi project related to the Trump family. While actual applications have yet to be deployed, current development plans indicate that World Liberty Financial will be a fork of Aave V3, the popular Ethereum-native cryptocurrency lending marketplace.
Despite the absence of a live protocol, World Liberty Financial has decided to deploy its own token, WLFI, which can be purchased on the Ethereum blockchain with a total supply of 25 billion.
While not expressly stated as a digital asset security, due to the regulatory uncertainty inherent in token sales, only persons exempt from mandatory registration under SEC Regulations D and S (i.e., accredited U.S. and non-accredited international investors) may invest in WLFI.
In addition, to ensure that the token does not fall into the hands of investors who do not meet WLFI's sale criteria, the token is subject to transfer restrictions, meaning it cannot be sent between wallets or sold on the open market.
Similar to stock holders, WLFI holders have the right to submit and approve governance proposals that shape the future of World Liberty Financial, and similar to an investment fund, the World Liberty Financial team may conduct financial management activities at its discretion.
Deployed to Solana on the eve of President Trump’s inaugural crypto ball, the aptly named TRUMP token is a memecoin bearing Donald’s likeness and last name.
As TRUMP token’s official website clearly states, this memecoin is not an “investment opportunity, investment contract, or security of any kind.”
Users visiting the TRUMP token website were directed to purchase the token using centralized crypto on-ramp Moonshot, which requires users to provide personally identifiable information for regulatory purposes, but anyone can purchase the digital asset permissionlessly without KYC through popular decentralized Solana exchanges like Jupiter.
While President Trump has publicly mentioned his related memecoin, the TRUMP token has neither a roadmap nor utility, and its developers have made no promises to provide such functionality in the future.
Trump's two tokens have very different requirements for buyers. While anyone can buy Trump meme, only accredited U.S. and unapproved international investors can participate in WLFI.
While U.S. financial regulators have yet to promulgate regulations on what constitutes a digital asset security, it is a safe bet that U.S. President and de facto SEC Chairman Donald Trump would not knowingly violate applicable securities regulations.
With this framework in mind, the unique facts and circumstances surrounding this offering appear to suggest that any token with utility, including governance or cash flow rights, may be subject to SEC jurisdiction as a digital asset security.
In contrast, digital asset collectibles (such as memecoin) may be clearly defined as non-financial products and thus exempt from regulatory and registration requirements.
We certainly don’t have all the answers, but the Trump administration has demonstrated its eagerness to make the United States the cryptocurrency capital of the world, and his administration has prioritized feedback on how to apply existing laws to digital assets, so it’s likely that large parts of the cryptocurrency industry will be subject to securities regulation in the near future.
While this development may disrupt the current market balance and cause some tokens to fall out of favor with investors, regulation itself is not a bad thing for an industry seeking mass adoption; it will usher in an unprecedented era of access and innovation for blockchain technology!
To work with larger companies, such as financial institutions that control funds and bear huge compliance burdens, the cryptocurrency industry must first achieve compliance.
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