World Liberty Financial WLFI plunges to new lows as governance proposal to unlock tokens is drafted

World Liberty Financial’s governance token, WLFI, fell to new lows on Friday after the crypto project backed by President Donald Trump and his sons said it is preparing a proposal to unlock WLFI for early holders, while also defending $150 million in stablecoin loans. The token, which launched last year as a non-transferable digital asset, traded around $0.08, down 14% over the past day, according to CoinGecko. WLFI’s market capitalization dropped by $427 million to $2.58 billion from nearly $3 billion.

FUD centers on Dolomite loans and liquidation risk

On Thursday, World Liberty pushed back against what it described as “FUD” circulating on X after it tapped the decentralized finance protocol Dolomite for loans denominated in USDC. Some observers argued that if World Liberty’s loans were liquidated, Dolomite users could face losses or encounter withdrawal difficulties due to what they described as thin liquidity tied to WLFI.

Critics also pointed to Dolomite’s lending pool for USD1, suggesting borrowing may be constrained as World Liberty’s stablecoin borrowing increased utilization within the protocol.

World Liberty’s response: WLFI is the “anchor borrower”

World Liberty said the concerns missed the point, arguing that its position as an “anchor borrower” generates yield that benefits other participants. In an April 9 post on X, the project stated: “By being the anchor borrower, we’re generating the yield that makes WLFI Markets compelling for everyone else. Everyday users are earning outsized stablecoin yields right now — at a time when traditional markets are offering very little.”

The project also rejected the idea that liquidation was imminent. “We are nowhere near liquidation,” World Liberty said. “Even if markets moved dramatically against us, we'd simply supply more collateral. That's not a risk.”

Collateral concentration and governance unlock proposal

World Liberty said Dolomite users are intentionally earning outsized stablecoin yields, and it noted that Dolomite co-founder Corey Caplan serves as an advisor to the project. Still, some observers said World Liberty did not clearly explain how it would repay the stablecoin debt. Another concern raised by observers was that part of the borrowed stablecoins was transferred to Coinbase Prime, where trading could occur.

Blockchain analysis firm Arkham Intelligence reported that, across two wallets, World Liberty has posted around $400 million worth of WLFI as collateral on Dolomite. The firm said this represented roughly 98% of the token’s supply on the platform, potentially concentrating risk.

World Liberty also said it is drafting a governance proposal that would allow WLFI holders to vote on unlocking tokens. Currently, about 75% of the token’s supply remains locked, limiting trading for investors, according to Token Unlocks.

Token sales, demand, and unlock schedule details

Across two sets of WLFI sales, World Liberty said last March it raised $550 million across 85,000 participants. Later, the project acknowledged “strong demand” from early adopters to make the token tradable. Token Unlocks data showed that about 20% of the token’s total supply has been allocated via public sales, valued at $2 billion on paper.

In a follow-up post on X on Thursday, World Liberty clarified that its governance proposal would not unlock all tokens immediately. The project said the submission would include a “long-term vesting and unlock schedule” intended to keep its ecosystem’s health in mind.

Decrypt reached out to World Liberty for comment but did not immediately receive a response.