Key Takeaways:
Senators Warren and Merkley demand an ethics review of Trump’s $2 billion UAE-linked stablecoin deal. UAE investment via Binance raises red flags about foreign influence and potential constitutional violations. Controversy may delay key crypto legislation through 2025.A political and financial scandal involving a Trump-backed stablecoin and a UAE-linked investment deal has sparked intense scrutiny from lawmakers and national security experts.
U.S. Senators Elizabeth Warren and Jeff Merkley call for an immediate ethics investigation into what they describe as “a staggering conflict of interest” surrounding the USD1 stablecoin, World Liberty Financial (WLF), and a $2 billion foreign investment routed through Binance.
Can USD1 Become a Vehicle for Foreign Influence?
In a letter dated May 5, the senators addressed to the Office of Government Ethics, warned that the deal could open “startling” levels of foreign influence into U.S. governance and may violate constitutional boundaries by financially benefiting President Trump and his inner circle.
Central to the controversy is World Liberty Financial, a cryptocurrency company backed by President Trump, his family, and Special Envoy to the Middle East Steve Witkoff.
Witkoff’s son, Zach Witkoff, co-founded WLF, which recently launched the USD1 stablecoin. The USD1 stablecoin is pegged to the U.S. dollar. The digital asset is now the 5th-largest stablecoin globally, with a market cap exceeding $2 billion.
According to the senators, a deal is underway for MGX, a UAE state-backed investment firm, to invest $2 billion into Binance using the USD1 stablecoin.
If finalized, it could generate millions of dollars for the Trump and Witkoff families through transaction fees, token issuance, and other revenue streams.
Warren and Merkley argue that this creates a “backdoor for foreign kickbacks and bribes,” exploiting the crypto system’s opacity to enrich political elites while evading scrutiny.
They noted that WLF would not only earn direct revenues from the USD1 transactions but could also earn profits from investing the $2 billion deposit.
Is the UAE Trading Crypto for U.S. Tech Secrets?
The deal has broader implications. Sheikh Tahnoun Bin Zayed Al Nahyan, chairman of MGX and the UAE’s National Security Advisor, is a key figure.
Dubbed the “Spy Sheik,” Tahnoun oversees the UAE’s surveillance and intelligence operations and is also chairman of G42, a tech firm flagged by U.S. officials for its extensive ties to Chinese entities. Tahnoun has also lobbied the U.S. government to relax export controls on advanced AI chips.
His recent meeting with President Trump raises questions about whether the crypto deal is part of a broader quid pro quo as the UAE seeks access to strategic U.S. technologies.
Experts fear loosening AI export controls could empower authoritarian regimes and undermine U.S. leadership in AI.
Will the Scandal Suspend Crypto Legislation?
The scandal comes amid renewed debate over stablecoin regulation. Senator Warren, a leading proponent of the GENIUS Act, a bill seeking to regulate stablecoins, took to X on May 4 to criticize the USD1 deal:
“The Trump family stablecoin surged as one of the largest in the world because of a shady crypto deal with the United Arab Emirates—a foreign government that will give them a crazy amount of money.”
She added that no crypto bill should move forward in the Senate until these ethical and national security concerns are addressed.
While some lawmakers push for additional hearings before advancing any legislation related to digital assets, House Financial Services Committee ranking member Maxine Waters announced plans to block a Republican-led event on May 6, intended to discuss stablecoin policy and digital assets.
Still, some crypto leaders downplay the alarm. For example, Ryan Selkis, founder of Messari, argued that stablecoin investments are simply directed into U.S. Treasuries and don’t amount to personal payouts to the Trump family.
He also noted that USD1 still accounts for less than 1% of the total stablecoin market.
Frequently Asked Questions (FAQs)
Following its $4.3 billion settlement with U.S. regulators and the resignation of its founder, Changpeng Zhao, who later served a prison term for money laundering, Binance seeks Middle Eastern growth but faces new scrutiny over the UAE deal. The exchange is the recipient of the $2 billion investment, which will be executed using USD1.
Eric Trump has criticized the inefficiency of traditional banking systems, indicating that stablecoin transactions like USD1 can settle in minutes, whereas international bank transfers via SWIFT can take over a day.
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