A group of Democratic senators has raised concerns over former President Donald Trump’s new cryptocurrency initiative, warning it could pose serious risks to the financial system.
On Friday, five senators sent letters to the Federal Reserve and the Office of the Comptroller of the Currency (OCC), questioning how these agencies plan to mitigate potential conflicts of interest arising from Trump’s roles as a policymaker and a private crypto issuer.
Lawmakers raise concerns over USD1
The senators are particularly alarmed by the launch of USD1, a stablecoin introduced by World Liberty Financial, a company linked to Trump’s family. The lawmakers argue that Trump’s involvement in the crypto sector could allow him to influence financial policies that benefit his business interests.
In the letter, the senators urged the Fed and OCC to clarify their strategies for maintaining regulatory independence. They cautioned that Trump might use his influence to prevent the implementation of strict stablecoin regulations or even block investigations into his company. Additionally, they warned that Trump could use federal resources to support USD1 while limiting access to competing digital assets.
Potential risks to financial stability
The Democratic lawmakers expressed concern that Trump’s ability to impact regulatory decisions could weaken financial safeguards. They pointed out that he could direct the Fed to implement emergency measures favoring USD1 in a financial crisis. This could include granting World Liberty Financial a master account with the Federal Reserve, which would provide direct access to the U.S. banking system.
The senators also emphasized the possibility of unfair market advantages. If USD1 receives preferential treatment, other crypto projects could struggle to compete. This, they argue, would undermine the integrity of financial regulations and create a system that favors one company over others.
Debate over the GENIUS Act
Trump has made cryptocurrency a key focus of his economic strategy, vowing to establish the U.S. as a global leader in digital assets. To achieve this, he has been pushing for the passage of the GENIUS Act, a bill granting the Fed and OCC authority over stablecoin regulation.
Many senators in the Banking Committee voted for the legislation, but the bill still encountered resistance from multiple congressional representatives. Multiple senators support the letter’s position that the financial oversight bill fails to include provisions that would stop political manipulation of oversight operations. The lawmakers underline that inadequate oversight procedures risk permitting presidents in office to tilt financial inspections toward their business interests, thus damaging the transparency and fairness of the system.