Trump's DeFi project World Liberty plans to build crypto products on the Aave platform, potentially bringing new users and liquidity to Aave, but may face SEC regulatory risks.

Written by: Sander Lutz

Translation: Plain Language Blockchain

Former President Donald Trump's long-rumored decentralized finance (DeFi) project is slowly coming to light, with more details emerging today.

On Wednesday, World Liberty Financial submitted a proposal to the governance forum of the Ethereum DeFi platform Aave, where Trump and his business partners plan to build their crypto products.

The project proposes to launch its services as an instance on Aave, meaning that the popular DeFi protocol Aave will provide the infrastructure to support the operations of World Liberty. In return, AaveDAO (an organization composed of Aave Token holders responsible for governing the platform) will receive 20% of all protocol fees generated by World Liberty, as well as 7% of the supply of the project's governance Token WLFI.

Although WLFI was initially described as "non-transferable," the proposal on Wednesday indicated that users would receive the Token as a reward for participating in World Liberty's liquidity pools. However, it remains unclear how the project will allow AaveDAO to manage the WLFI Token and distribute it to users if these Tokens are indeed non-transferable. Representatives from World Liberty Financial have not immediately responded to Decrypt's request for comment.

Members of the AaveDAO community will now discuss this proposal and decide whether to vote to allow Trump and his partners to build their DeFi products on Aave's decentralized lending protocol. WLFI holders will also need to approve the plan separately.

The proposal also revealed that World Liberty will initially allow deposits of Ethereum (ETH), Wrapped Bitcoin (WBTC), and popular stablecoins USDC and USDT. The project stated that it will first focus on providing stablecoin liquidity for ETH and WBTC, with a particular emphasis on attracting first-time DeFi users—likely those familiar with the Trump brand but less knowledgeable about the complexities of liquidity pools and digital asset lending.

Last month, Trump and several partners, including his sons Eric and Donald Jr., as well as another New York billionaire, Steve Witkoff, announced the launch of World Liberty. The project will offer cryptocurrency lending services on the Ethereum blockchain network, similar to many existing applications in DeFi like Aave.

At both the time of the announcement and now, the World Liberty team has doubled down on promoting the project as a more "user-friendly" alternative to existing DeFi options (like Aave), as their interfaces often require a higher level of technical knowledge to use smoothly. The World Liberty team promised AaveDAO members that their project could "bring a large number of new users and new liquidity to Aave."

There are still many unknowns regarding the World Liberty project, particularly how it will operate and where it will be launched. At the end of September, the project opened a whitelist allowing specific Americans—limited to accredited investors—to purchase WLFI Tokens. According to regulations from the U.S. Securities and Exchange Commission (SEC), these Tokens can only be offered to particularly wealthy or knowledgeable investors to mitigate risk.

There are still some questions about the instance of World Liberty on Aave—even if the proposal is approved and eventually goes live. Previously, the World Liberty team stated that they plan to allow all Americans to use the platform "in the future."

However, the project team confirmed to Decrypt that the proposed World Liberty Aave instance will be open to all Aave users—meaning that Americans will indeed be able to use it.

But this plan is not without risks. Other similar U.S. DeFi protocols, such as Uniswap, have recently received notices from the SEC indicating plans to sue them for allegedly offering illegal unregistered securities.

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