Trump Hut 8 mining venture; Yield-bearing stablecoins rejected

United States President Donald Trump’s family is leaving no stone unturned in their quest to get rich(er) off digital assets, but is there a limit to how much naked grifting America will stand from its first family?

• Trump, Hut 8 ink BTC mining deal 
• Trump takeover of World Liberty Financial complete
• Trump crypto ventures raising barriers for crypto legislation
• Crypto bros want yield-bearing stablecoins, Congress doesn’t
• Emmer says Wyoming stable is a CBDC, state rejects label

On March 31, block reward mining outfit Hut 8 (NASDAQ: HUT) announced the launch of American Bitcoin Corp (ABC), “a majority-owned subsidiary of Hut 8 focused exclusively on industrial-scale Bitcoin mining and strategic Bitcoin reserve development.” 

Hut 8 will contribute “substantially all” of its ASIC miners to ABC in exchange for an 80% stake in America Data Centers—a shell company established just last month by President Trump’s sons, Eric and Don Jr.—that will rebrand as ABC. Eric has been named ABC’s chief strategy officer.

Hut 8, which started its ‘pivot to AI’ high-performance computing operations last year, will serve as ABC’s “exclusive infrastructure and operations partner through a series of long-term commercial agreements that will generate stable, contracted revenue streams in Hut 8’s Power and Digital Infrastructure segments.”

As for what the Trumps are bringing to this table (besides their dad’s name) for their 20% stake in ABC, we’re led to believe that “Eric Trump’s commercial acumen, capital markets expertise, and commitment to the advancement of decentralized financial systems” is worth the price of admission. (Since this news broke on March 31, we’re assuming it’s not an April Fool’s prank.) 

Hut 8 CEO Asher Genoot said carving out the mining business into a standalone entity “creates two focused yet complementary businesses, each purpose-built for its respective mandate.” Plus, now one of those businesses is effectively backed by the president of the United States, who has publicly pledged to do whatever it takes to make America the BTC mining ‘capital of the world.’ (Nobody tells Trump that one of Hut 8/ABC’s “initial colocation sites” is based in Alberta, Canada.)

Not everyone is as impressed as Hut 8’s management seems to be with the deal. Matthew Sigel, head of digital asset research at investment manager Van Eck, tweeted that Hut 8 was “selling 61,000 miners in exchange for an 80% stake in a subsidiary that they previously owned 100% of.” It’s almost as if Hut 8 believes benefits might be derived from offering lucrative freebies to very powerful people. Huh. 

As for ABC’s plans for BTC ‘reserve development,’ Hut 8 already held some 10,237 BTC in its existing reserve at the end of February. Trump has announced plans to establish a national Strategic Bitcoin Reserve that will ensure no more BTC already in the government’s possession is sold, while also exploring ‘budget neutral’ ways to add additional BTC to the reserve. ABC’s execs insist their reserve plans are unrelated to those of the federal government. 

Bloomberg quoted Hut 8’s Genoot saying ABC’s plan was to raise additional private capital before seeking an initial public offering. Despite the announcement claiming that ABC would be a “pure-play Bitcoin miner,” Genoot said the long term goal was to have “two sister publicly traded companies” under a single vertically integrated umbrella. 

World Liberty Financial now a pure Trump play

Eric Trump told the Wall Street Journal (WSJ) that, while ABC will remain separate from the Trump Organization (which Eric leads), the Trump-controlled decentralized finance (DeFi) project World Liberty Financial (WLF) might collaborate with ABC in some unexplained fashion at some unspecified point.

Speaking of WLF, Reuters reported on a little-noticed revision to WLF’s fine print, revealing that “DT Marks DEFI LLC, an entity affiliated with Donald J. Trump and certain of his family members, own approximately 60% of the equity interests in WLF Holdco LLC.” Said Holdco “holds all of the rights to net protocol revenues from the WLF protocol (other than net proceeds from the sale of $WLFI tokens).”

The change means that once WLF actually launches any of the many projects it claims are in the works, the Trumps will get a 60% cut of revenue generated from WLF’s operations. That’s in addition to the 75% of revenue derived from sales of WLF’s governance token WLFI, total sales of which currently stand at $550 million. 

DT Marks’ majority control came after WLF co-founders Zak Folkman and Chase Herro appear to have relinquished their own control over the WLF protocol. Folkman and Herro were previously involved in Dough Finance, a borrowing/lending platform that suffered a $1.8 million exploit last July. 

After WLF’s other co-founders take their cut, WLF will be left with a mere 5% of revenue raised to date with which to fund its various ventures. Moreover, Reuters quoted Marquette University professor David Krause saying WLF’s centralized structure “pretty much excludes public investors or token holders from any meaningful financial participation,” regardless of how much WLFI they might hold. 

Countless critics have warned that WLFI sales provide deep-pocketed individuals/entities seeking Trump’s favor with a way to funnel cash into the president’s pocket. Reuters said 70% of WLFI sales came via digital wallets that spent at least $100,000, while 50% spent over $1 million. 

In addition, Trump’s foray into memecoins a few days before his inauguration is believed to have generated around $350 million in sales and trading fees for Trump-linked entities. 

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Trump’s crypto grifts getting on Capitol Hill’s nerves

The Trump family’s aggressive all-in on crypto while the president (a) pushes Congress to pass crypto-friendly legislation and (b) appoints individuals intent on demolishing regulatory guardrails has given pause to some digital asset supporters on Capitol Hill. 

Over the weekend, Politico reported on a growing sense among Democratic lawmakers—whose support will be pivotal in passing stablecoin legislation and a crypto market structure bill—that Trump’s grifting could gum up these works. 

Rep. Jim Himes (D-CT) was quoted as saying he “can’t think of anything quite so damaging to bipartisanship” than Trump’s naked crypto cash grabs. Even Sen. Cynthia Lummis (R-WY), one of Washington’s more staunchly pro-crypto pols, acknowledged that Trump’s pursuit of crypto profits could “make life harder” for those looking to advance digital asset legislation. 

Sen. Kristen Gillibrand (D-NY), co-author of one of the stablecoin bills currently in play, said the Trump family’s activities are “certainly not helpful. It makes something that’s a very serious financial payment system into something that seems non-serious.”

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Stop trying to make yield-bearing stablecoins happen, it’s not going to happen

We’ll hold off microanalysis of the new and improved STABLE except to note that it doesn’t allow yield-bearing stablecoins, something that is proving to be a major bone of contention with both stakeholders and legislators. STABLE explicitly states that stablecoin issuers “may not pay interest or yield to holders of its payment stablecoins.”

GENIUS was originally a little more flexible in that it didn’t explicitly prohibit yield-bearing stables, but the draft that the Senate Banking Committee approved made it clear that a payment stablecoin “does not offer a payment of yield or interest.” As committee chair Tim Scott (R-SC) put it, “legislating a workable legal framework for similar yield-bearing products would require separate legislation.” 

Dollar-denominated stablecoin issuers are required to hold reserve assets backing their issued tokens 1:1 with the buck, traditionally in the form of bank deposits, U.S. Treasury bills, money market funds, and the like. Issuer revenue primarily comes from interest earned via these assets, but some issuers are trying to grow their market share by cutting stablecoin customers in for a slice of this yield-bearing pie. 

In the eyes of financial regulators, the ability to generate yield traditionally means the product is a security, with all the additional oversight and restrictions that designation entails. Last year, the Coinbase (NASDAQ: COIN) exchange halted its European Economic Area (EEA) customers’ ability to earn rewards (aka interest) by staking Circle’s USDC stablecoin. That move was made in order to comply with the EU’s new Market in Crypto-Assets (MiCA) regulations, which prohibit offering interest on ‘e-money tokens’ aka stablecoins. 

Last June, New York-based stablecoin issuer Paxos Trust released the yield-bearing Lift Dollar (USDL) but notably did so in Abu Dhabi, not the United States. In February, Figure Markets released its YLDS stablecoin that received a favorable nod from the U.S. Securities and Exchange Commission (SEC), but only because Figure made no bones about the fact that YLDS is indeed a security. 

None of this deterred Coinbase CEO Brian Armstrong, who this week tweeted his free-market argument that “U.S. stablecoin legislation should allow consumers to earn interest on stablecoins … Banks and crypto companies alike should both be allowed to, and incentivized to, share interest with consumers.”

Armstrong’s pitch was shot down by Rep. French Hill (R-AR), House Financial Service Committee chairman and STABLE’s co-author. Hill said both legislative chambers were in agreement that stablecoin legislation only has the support it does because the vision for stablecoins is that “it’s not going to be an investment per se. It’s meant to be payment.” 

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Wyoming’s ‘stable token’ plan nearing finish line

While the feds try to herd their legislative cats, the state of Wyoming is forging ahead with plans to become the first U.S. state to issue its own dollar-denominated ‘stable token,’ possibly as early as July. 

On March 20, the Wyoming Stable Token Commission (WSTC) announced that the Wyoming Stable Token (WYST) is considering nine “candidate blockchains” on which WYST might transact. These include “layer-1 networks Solana, Ethereum, Avalanche, Sui, Stellar, and layer-2 networks such as Polygon, Arbutrium [sic], Base, and Optimism.” (We’re pretty sure they meant Arbitrum.)

Wyoming Gov. Mark Gordon said WYST “is designed to be a digital representation of the U.S. dollar, fully backed by U.S. Treasuries, cash, and repurchase agreements. It will maintain a statutory requirement of not less than 102% capitalization to bolster stability.”

Speaking at last week’s DC Blockchain Summit, Gordon revealed that the WSTC has enlisted omnichain interoperability protocol LayerZero as its “token development and distribution partner.” Testing is set to get underway this month, setting in motion a plan that began years ago as part of the state’s desire to remain at the bleeding edge of state-level digital asset innovation.

Precisely why Wyoming needs its own stablecoin is a bit unclear, although WSTC exec director Anthony Apollo told the summit audience that WYST “will grant holders the ability to transmit dollar-denominated transactions of any value, anywhere in the world, nearly instantly, with significantly reduced fees compared to traditional ACH or wires.”

Critics of Wyoming’s plan include Rep. Tom Emmer (R-MN), the House Majority Whip and an ardent crypto supporter. Emmer told Decrypt that WYST was basically a central bank digital currency (CBDC), and “I personally am vehemently against any government issuing a tokenized version of its currency.”

Emmer has introduced legislation that would prohibit the federal government from issuing a CBDC, based on his view that CBDCs are a tool employed by totalitarian states obsessed with surveilling their citizens’ financial dealings. However, Gov. Gordon recently signed a bill “prohibiting state agencies from requiring a central bank digital currency as payment.”

WSTC’s Apollo pushed back against Emmer’s criticism by saying Wyoming would “have rules in place about what we can and can’t collect, how we can treat that data, and how we can act on that data.” Apollo also noted that the state “was not issuing any cash,” so there was no inflationary risk by issuing WYST.

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