WLFI's $3 billion treasury proposal faces community resistance! USD1 soars, but WLFI drops 56% this year

Supported by the Trump family background, the DeFi project World Liberty Financial (WLFI) is currently embroiled in a fierce internal power struggle. On December 28, the project proposed a controversial governance measure, planning to utilize no more than 5% of the unlocked WLFI token treasury to subsidize and incentivize the adoption of its stablecoin USD1, aiming to catch up with giants like USDT and USDC. However, the proposal faced strong opposition early in community voting, with over 67% of voters casting against it. Dramatically, at nearly the same time, USD1’s circulating market cap broke through the $3 billion mark for the first time, ranking as the seventh-largest stablecoin globally. Meanwhile, WLFI governance token’s price has fallen 56% from its peak, and amid political scrutiny and fierce market competition, the project’s development path remains full of uncertainties.

The Beginning of Controversy: 67% Oppose WLFI Treasury Use Proposal to Promote USD1

On December 28, World Liberty Financial released a key community governance proposal, focusing on the project’s most vital financial resource—the token treasury. The proposal seeks community approval to allocate no more than 5% of the total unlocked WLFI supply to establish a dedicated fund. The sole purpose of this fund is to subsidize the growth of its USD1 stablecoin, including but not limited to incentive programs and promotional collaborations with various platforms and institutions in the crypto space.

The project describes this plan as a “flywheel” driving ecosystem growth. The logic is that by subsidizing to accelerate USD1 adoption, it can attract more users, trading platforms, financial institutions, and public chains to integrate WLFI infrastructure. Expanding USD1’s use cases will directly enhance WLFI network influence and economic activity, ultimately creating value for the entire WLFI ecosystem and strengthening the long-term utility of WLFI tokens. The proposal explicitly states: “Increasing USD1 adoption creates more value capture opportunities for the entire WLFI ecosystem, with these benefits allocated to WLFI governance initiatives, thereby enhancing the token’s long-term practicality.”

Additionally, the proposal openly acknowledges the competitive pressures USD1 faces. Despite rapid growth, compared to top stablecoins with market caps in the hundreds of billions, USD1 remains in a catching-up position. WLFI considers this strategic expenditure necessary to narrow the gap with competitors. The team specifically mentioned a recent promotion by a major CEX offering up to 20% annualized yields on USD1, and plans to use its treasury funds to replicate such high-yield collaborations to attract users.

Proposal core data and voting status

• Proposal release date: December 28, 2024
• Planned fund utilization: Up to 5% of the unlocked WLFI supply
• Purpose of funds: USD1 incentive programs and partnership expansion
• Voting deadline: January 4, 2026
• Current opposition rate: 67.7% (as of December 29 data)
• Transparency pledge: All incentivized partners will be publicly disclosed

Despite the ambitious blueprint painted by the project team, the WLFI token holder community responded tepidly, even with suspicion. Shortly after voting commenced, opposition voices dominated. The initial opposition rate of 67.7% clearly reflects community concerns over large treasury depletion. Some analysts believe holders prefer using treasury funds for direct buybacks and token burns to boost prices, rather than long-term but uncertain market subsidies. This vote has become a key litmus test for assessing WLFI’s decentralized governance effectiveness and whether the community and team are aligned.

USD1’s Rapid Rise: Strategy and Ambitions Behind the $3 Billion Market Cap

Contrasting sharply with the rocky treasury proposal, USD1 stablecoin has been on a strong upward trajectory. According to Coinmarketcap data, USD1’s circulating supply recently surpassed the psychological threshold of $3 billion, peaking at over $3.07 billion. This milestone secures its position as the seventh-largest stablecoin worldwide, behind PayPal’s PYUSD but surpassing competitors like Ripple’s RLUSD.

Zach Witkoff, co-founder and CEO of World Liberty Financial, attributes this achievement to broad market demand. He states that USD1 was initially created to meet traditional institutions’ need for a “cryptonative and trustworthy” DeFi tool, but after launch, it received unexpectedly strong acceptance across sectors. In less than a year, USD1 has become the preferred stablecoin for many leading enterprises. Technically, USD1 is a fully redeemable, 1:1 USD-backed stablecoin with reserves including U.S. Treasuries, cash deposits, and other cash equivalents, providing stability and credibility aligned with traditional finance.

USD1’s rapid growth is no accident; it is driven by a multi-pronged market strategy. First, it targets conservative institutions and users wary of existing stablecoins (like Circle and Tether) but interested in DeFi participation. Second, it quickly established liquidity and use cases through partnerships with major DeFi protocols like PancakeSwap. Most notably, recent collaborations with leading CEXs offering ultra-high annual yields have directly catalyzed its market cap surge. This “subsidy-driven growth” approach is common in the fiercely competitive stablecoin market, but WLFI is clearly willing to invest heavily in this game.

However, surpassing $3 billion is just a new starting point. The stablecoin market is highly competitive, with dominant players like USDT and USDC holding over 80% of the market, offering unmatched liquidity, exchange support, and user habits; DAI and FDUSD occupy the middle tier with their decentralized features or exchange backing; and many emerging stablecoins, including USD1, compete for remaining market share.

For USD1, opportunities lie in niche markets and ecosystem integration. Its potential strong association with Trump supporter communities could make it the preferred payment, donation, and business settlement stablecoin within that cultural niche, offering high stickiness. Additionally, WLFI’s planned expansion into RWA (Real World Assets) could provide USD1 with tangible, income-generating reserves like real estate, government bonds, or private credit, enhancing its appeal and stability—differentiating it from purely fiat-backed stablecoins relying on commercial paper or bank deposits.

Yet, challenges are formidable. First, trust issues: despite claims of transparent and secure reserves, as a relatively new stablecoin with political ties, USD1 must work harder to establish broad global trust. Second, regulatory hurdles: worldwide, stablecoin regulation is tightening, especially in the US, where projects linked to political figures may face stricter scrutiny. Third, economic sustainability: current growth heavily relies on subsidies; whether it can transition to organic growth driven by network effects and real demand remains critical. If subsidies cease, usage could plummet, threatening market cap and liquidity.

In summary, World Liberty Financial stands at a crucial crossroads. The outcome of the treasury proposal vote will reveal whether the community and team share a common strategy; WLFI’s token price needs solid support to restore market confidence; and USD1 must shift from “subsidy-driven” to “value-driven” growth. Balancing political aura, decentralization ideals, short-term incentives, and long-term development will determine the future trajectory of this unique project. The crypto market is never short of stories, and WLFI’s story is undoubtedly one of the most intriguing to watch right now.