The cooperative removed its USD1 stablecoin linked to the Trump family after World Liberty Financial

HTX (formerly Huobi) has announced the delisting of the USD1 stablecoin issued by World Liberty Financial and the automatic conversion of all user holdings to Tether at a 1:1 ratio.

6/9/20264 min read

The delisting process of cooperatives and its impact on consumers.

HTX temporarily suspended trading of four USD1-related trading pairs from June 5, 2026 at 13:00 UTC (WLFI/USDT, USD1/USDT, BTC/USD1, and ETH/USD1), then officially announced the delisting on June 6 with the conversion taking effect on June 7 at 3:00 UTC, in which all remaining USD1 balances of users were automatically converted to USDT without the explicit consent or action of the client.

The automatic conversion mechanism allows the cooperative to remove the USD1 risk from the platform without requiring users to perform manual conversion or exchange transactions, instead unilaterally imposing asset substitution on the balance held by the exchange.

HTX describes the freezing of World Liberty Financial's wallet as a "unilateral" decision lacking contractual or legal basis and inconsistent with the designation of sanctions targeting the Panama-registered entity Huobi Global SA, not the operating subsidiary of the HTX exchange.

The exchange stated that Huobi Global SA is a separate legal entity from the existing operations of the HTX exchange and that the UK sanctions designation should not extend to the trading platform or customer funds held in custody on the exchange.

HTX issued an official statement saying the company would "pursue legal action to the end" if World Liberty Financial did not reverse the wallet freeze, establishing a legal stance against the project linked to the Trump family and signaling its intention to examine whether protocol-level asset freezing mechanisms remain effective against third parties who disagree when implemented through smart contract code rather than traditional legal measures.

Disputes over context and sanctions

The UK government designated Huobi Global SA on May 26, 2026, under the Russia Sanctions Regulation, citing "reasonable grounds to suspect" the entity had supported the Russian government through financial services. This language reflects the UK's standard evidence threshold for asset freezes, rather than proven evidence of actual conduct. This designation triggered automatic blocking mechanisms in stablecoin smart contracts, where World Liberty Financial appears to maintain code allowing for real-time asset freezes based on sanctions.

HTX has disputed the applicability of UK sanctions to its current trading operations, arguing that Huobi Global SA represents a legacy corporate structure established under a different ownership and operating context than the current HTX platform. This distinction is significant in relation to whether the WLFI's cited reasons for compliance with sanctions legally apply to a trading platform not affiliated with the designated entity.

The timing of the freeze, coinciding immediately after the UK announced sanctions, suggests that World Liberty Financial maintained automated or semi-automated systems that allowed for rapid wallet freezes to comply with regulatory directives, rather than requiring the team to make prudent decisions for each action related to the asset. This created a pattern where regulatory events triggered stablecoin freeze mechanisms in a chain reaction, extending beyond narrow directives to broader, indirectly involved entities.

What are the implications of this for the Stablecoin ecosystem?

The HTX-WLFI dispute sets a precedent demonstrating that stablecoin-issuing wallets holding centralized retail assets remain vulnerable to issuer-initiated freeze mechanisms, rapidly deployed in response to corporate disputes, regulatory designations, or arbitrary issuer decisions relating to the legal or operational status of specific counterparties.

This incident highlights the fundamental unreliability of stablecoins as a reliable medium of exchange or store of value when the issuer retains the unilateral power to freeze assets without prior notice or consent from the client. The real risk means that users holding stablecoins on exchange or custody platforms face the systemic risk that the issuer's actions could lead to the unexpected conversion or freezing of held assets regardless of the client's or custodian's operational legitimacy.

The delisting simultaneously damages USD1's credibility as a stablecoin asset by demonstrating that the issuer's control mechanisms can use the smart contract code as a weapon against specific counterparties, diminishing customer confidence in USD1's utility as a reliable means of payment or long-term store of value. The practical impact of the asset freeze has been shown to potentially limit USD1's adoption among institutional and individual investors seeking reliable stablecoin alternatives.

For World Liberty Financial in particular, the aggressive implementation of asset freezes against prominent entities, including Justin Sun, generated negative public opinion regarding project governance and potential contractual risks, undermining institutional investment confidence despite the connection to the Trump family providing political legitimacy among certain voter groups.

Assessment and Conclusion

The dispute between Sun and World Liberty Financial highlights the tensions within the cryptocurrency ecosystem regarding the balance between issuer controls for regulatory compliance and user asset protection. While WLFI justified the freezes on its obligation to comply with UK sanctions, the rapid deployment and the scope of the freezes extending beyond narrowly designated entities raise questions about whether the issuer's interpretation exceeded legitimate regulatory requirements.

For other stablecoin issuers, this event sets a cautionary precedent about the risks of maintaining freeze mechanisms at the protocol level, while allowing regulatory compliance, but creating operational vulnerabilities that allow them to be used as weapons in personal disputes and corporate conflicts. Alternative stablecoin architectures that mitigate issuer freezes through decentralized governance structures or control mechanisms may become more attractive despite the potential complexity of regulatory compliance.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrencies. This is not financial or investment advice at all. Every investment decision should be based on careful consideration of your personal portfolio and risk tolerance. The opinion in the article does not represent the official position of the platform. We recommend that readers do their own research and consult experts before making any investment decisions.

Synthesized and analyzed by HCCVenture

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