World Liberty Financial (WLFI), a decentralized finance venture backed by Donald Trump, minted 25 million USD1 stablecoins on Monday morning. The project simultaneously burned 3 million of the tokens, resulting in a net supply increase of $22 million. These actions follow reports that the venture previously borrowed approximately $75 million in stablecoins against its own governance tokens, an aggressive strategy that pushed the Dolomite lending pool to near-100% utilization and blocked other depositors from withdrawing funds.
On-chain data indicates the mint was funded through BitGo Custody and executed via the project’s USD1 Mint Authority contract. The 3 million tokens retired in the burn were moved from an address starting with 0x2ce to the TokenGovernor contract before being sent to a null address. Prior to the mint, smaller test transactions ranging from $10 to $40,800 were sent to an inactive address, a pattern frequently used to verify wallets before high-value transfers.
Managing the Dolomite liquidity crisis
The venture claims to have repaid $25 million of the $75 million borrowed against its own collateral. This repayment effort follows intense scrutiny regarding the project's use of the Dolomite protocol, a platform where Dolomite co-founder Corey Caplan serves as an advisor to World Liberty Financial. The concentration of WLFI governance tokens as collateral created a bottleneck that left users unable to access their assets.
While the project has initiated supply management through the mint and burn, it has not disclosed how the new tokens will be deployed or why 3 million tokens were permanently removed from circulation. Though stablecoin issuers typically burn tokens when collateral is redeemed, WLFI has provided no specific explanation for this move.
Concerns regarding the venture's financial structure have drawn comparisons to past industry collapses, with critics pointing to the risk of borrowing heavily against one's own governance token. Since the Dolomite transactions were first reported on April 9, the value of the WLFI governance token has declined by approximately 15%. The project has yet to clarify whether the fresh liquidity is intended to replenish the Dolomite lending pool, support treasury operations, or fulfill other obligations.
