On December 4th, there was a news item that many may have overlooked. World Liberty Financial quietly purchased 636,000 BANK tokens, which at the time's price amounted to just over $40,000. This figure may not seem large, but you need to understand who WLFI is. This is an organization with intricate ties to the American political sphere, and every move they make is not trivial.
The USD1 stablecoin launched by WLFI is now the underlying asset of Lorenzo Protocol's USD1+ OTF product. This relationship chain becomes clear once unraveled. WLFI is not just simply investing in BANK but is deeply bound to Lorenzo's ecosystem because Lorenzo's OTF products can bring real use cases and liquidity demands to USD1.
First, let’s talk about what WLFI really is. Although official information states it is an independent DeFi project, insiders know that its backing capital and political resources are complex. When the USD1 stablecoin was launched, some speculated it might become a vehicle for some policy experiment. It now seems this speculation may not be baseless.
Lorenzo's USD1+ OTF product is cleverly designed. It divides users' USD1 into three layers for investment: the first layer is the tokenized version of RWA, specifically U.S. Treasury bonds; the second layer is CeFi quantitative strategies; and the third layer is DeFi lending and mining. This structured design resembles traditional financial money market funds.
WLFI's choice to bind its stablecoin USD1 to Lorenzo is likely due to recognizing Lorenzo's mature asset management framework. The biggest issue with stablecoins is how to manage reserves. Simply keeping them in a bank account results in low yields, but investing in high-risk assets could impact stability.
Lorenzo's three-layer income structure addresses this contradiction perfectly. The RWA layer provides stable underlying income, the CeFi quantitative layer offers medium-risk enhanced returns, and the DeFi layer provides high returns while controlling positions. This configuration allows the reserves of USD1 to maintain value and appreciate without taking on excessive risk.
More critically, Lorenzo has established a solid compliance framework. They have set up a dedicated compliance committee that reviews investment strategies and risk conditions every two weeks. This governance structure is common in traditional finance but is relatively rare in the DeFi space.
On December 12, the U.S. OCC approved crypto trust bank licenses, with institutions like Ripple and Fidelity obtaining qualifications. This policy signal is clear: the regulatory body is gradually accepting crypto assets as legitimate financial instruments. Lorenzo's institutional-level asset management model happens to align with this policy trend.
On December 16, a U.S. bank released a report calling for traditional banks to embrace blockchain stablecoins and tokenized deposits. This is another policy signal that the boundaries between traditional finance and cryptocurrency are blurring. Lorenzo, which combines DeFi flexibility with a traditional financial compliance framework, could become a bridge between the two worlds.
WLFI's purchase of BANK is not just a simple investment action but resembles a strategic cooperation signal. Because $40,000 is really not a significant amount for an institution, the symbolic meaning of this action is substantial. It is equivalent to WLFI publicly endorsing Lorenzo's products and model.
From Lorenzo's perspective, collaborating with WLFI also has significant benefits. First is the liquidity of USD1. If WLFI can expand USD1, Lorenzo's USD1+ OTF product can attract more funds. Currently, the TVL of USD1+ is 83.59 million USD. While not small, it still has substantial growth potential compared to EnzoBTC's 539 million.
Secondly, there is a policy safety net. If WLFI indeed has political resources behind it, then cooperating with WLFI may give Lorenzo more leverage in dealing with regulators compared to other DeFi projects. This is crucial in a highly regulated environment like the U.S.
The third is brand endorsement. Although WLFI is controversial, its recognition is significant. Being associated with WLFI will help Lorenzo enhance its visibility among institutional investors, as many traditional finance individuals may not understand DeFi but know WLFI.
However, this deep binding also carries risks. The first is political risk. If the political relationships behind WLFI encounter problems, Lorenzo may be implicated. Although Lorenzo is technically independent, market sentiment can be irrational. If WLFI comes under regulatory scrutiny, Lorenzo's users may panic and withdraw funds.
Secondly, there is a reliance on USD1. Lorenzo is currently making USD1+ one of its core products. If there are issues with the USD1 stablecoin itself, such as de-pegging or regulatory halts, Lorenzo's USD1+ OTF product will be directly impacted. Additionally, Lorenzo has invested significant resources in this area, including technical development and market promotion.
The third is compliance costs. To cooperate with WLFI, Lorenzo may need to raise compliance standards, including KYC and AML requirements, which will increase operating costs and may affect user experience, as many DeFi users are unwilling to provide personal information. If Lorenzo enforces KYC, it might lose a portion of its users.
From the timeline perspective, WLFI bought BANK on December 4, while Lorenzo's USD1+ OTF product launched on July 22, which means there was a gap of almost 5 months. This indicates that WLFI did not rush into buying BANK but rather observed for a period before confirming Lorenzo's product was reliable.
This observation period is crucial because it indicates that WLFI is not a blind investment, but rather a professional team conducting due diligence. They may have reviewed Lorenzo's audit reports, custody plans, governance mechanisms, TVL growth curves, user feedback, etc., and confirmed that there are no significant risks before deciding to buy in.
Moreover, WLFI chose to buy in early December, coinciding with the OCC's approval of crypto trust bank licenses and the U.S. bank's blockchain report release. This timing is not coincidental, as WLFI likely assessed that the policy environment was improving, prompting them to accelerate their positioning.
Lorenzo's USD1+ OTF product roadmap shows plans to launch on the mainnet in Q1 2026, with mid-term expansions into additional RWA asset classes, including not just treasury bonds but potentially real estate investment trusts, corporate bonds, and commodities. If achieved, USD1+ will not just be a money market fund, but a fully functional asset allocation platform.
If this vision is realized, it will be more attractive to WLFI because USD1, as a stablecoin, requires not just simple deposit and withdrawal functions but a complete financial ecosystem. Lorenzo provides exactly this ecosystem, allowing users to use USD1 for collateralized lending, structured investments, and participation in various DeFi protocols.
However, to achieve this vision, Lorenzo needs to overcome many obstacles. First is regulation. RWA involves real-world assets that must have compliant custody and trading mechanisms, which requires collaboration with traditional financial institutions. The negotiation period is long and may involve many legal issues.
Secondly, there is the technology. Tokenizing assets like real estate corporate bonds requires complex smart contracts and oracle systems. Moreover, the valuation and liquidity of these assets differ from cryptocurrencies, necessitating specialized risk control models.
The third is market education. Most DeFi users are still unfamiliar with RWA. They are accustomed to high-yield mining and staking, and may find annual returns of 5% to 10% from RWA insufficiently stimulating. Lorenzo needs to spend time and resources educating the market to help users understand the value of stable returns.
Although WLFI's purchase of BANK is not large, it may be a starting point. If Lorenzo's USD1+ OTF product performs well, WLFI may continue to increase its holdings and could play a greater role in governance, as the main function of BANK tokens is voting rights.
Currently, the holding structure of BANK tokens is very concentrated, with the top 10 addresses controlling 90% of the supply. If WLFI wants to have a voice in governance, it needs to accumulate more tokens or stake BANK to obtain veBANK, thereby increasing its voting weight.
However, WLFI may not make large-scale purchases but choose to collaborate with Lorenzo's large holders or committee members, indirectly influencing decisions. This approach is common in traditional finance, where holding less than 5% can still wield significant influence.
The action of WLFI buying BANK, although not a large amount, carries strong signaling significance. It reflects that the policy environment is changing, and the boundaries between traditional finance and cryptocurrency are blurring. Lorenzo, as a bridge-type project, may occupy a favorable position in this process, but must also be wary of political risks and compliance costs.
