The U.S. Treasury Department and banking regulators have quietly removed a key safeguard that previously allowed them to block bank ownership based on reputational concerns, a shift that directly enabled a controversial foreign stake in President Trump's new crypto-focused financial institution. On August 27, the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) issued a joint final rule narrowing the definition of "unsafe or unsound practice" to focus only on "material harm to financial condition," eliminating reputational risk as a supervisory criterion. The timing proved significant: the same day, the Wall Street Journal reported that Sheikh Tahnoon bin Zayed al Nahyan, the UAE's national security advisor, owns 49% of World Liberty Trust Company (WLTC), the proposed national bank of Trump-linked World Liberty Financial (WLF).

What Exactly Changed in Bank Regulation?

The OCC and FDIC's August 27 rule represents a major shift in how federal banking agencies evaluate whether financial institutions pose risks to customers and the financial system. Previously, regulators could deny or restrict bank applications based on reputational concerns, even if the applicant's financial condition appeared sound. This power was particularly relevant in the crypto sector, where regulatory skepticism and public controversy have historically complicated bank licensing efforts. The new rule eliminates that discretion, requiring regulators to focus narrowly on financial harm rather than broader concerns about an institution's public standing or the character of its owners.

The change originated from a 2025 executive order by President Trump aimed at addressing what crypto advocates call "Operation Choke Point 2.0," a reference to alleged Biden-era efforts to restrict banking access for cryptocurrency companies. The rule takes effect in 60 days from its August 27 publication date.

Who Is the UAE Official Behind Trump's Crypto Bank?

Sheikh Tahnoon bin Zayed al Nahyan, known informally as the UAE's "spy sheikh" for his role as the country's national security advisor, acquired his 49% stake in WLTC through an entity called StringZ Holding RSC, according to reporting by the Wall Street Journal. The sheikh and co-investors took this position in the bank-in-waiting after the OCC granted WLTC conditional approval. The OCC required StringZ and two other major shareholders to sign "passivity commitment" documents, which limit them to passive involvement in the bank's operations. The OCC stated this was intended to "stave off further scrutiny from Congress" and marked only the second time since Trump returned to office in January 2025 that the agency required such commitments.

The sheikh's investment in WLTC follows his earlier 49% stake in WLF itself, which he acquired in January 2025 for approximately $500 million, with $263 million reportedly flowing directly to Trump family-controlled entities. When questioned about the ownership structure, a WLF spokesperson told CNBC that "no one at World Liberty works for the U.S. government and there are no conflicts of interest".

How to Understand the Regulatory and Ownership Implications

• Reputational Risk Removal: The OCC and FDIC can no longer block bank applications based on concerns about an applicant's public reputation or the controversial nature of their business, only on direct financial harm. This removes a traditional check on foreign government officials or entities with security concerns from obtaining banking licenses.
• Passivity Commitments as Workaround: Rather than deny WLTC's application, the OCC required major shareholders to sign passivity agreements, a compromise that allows foreign ownership while theoretically limiting operational control. However, the effectiveness of such commitments in practice remains unclear.
• Beneficial Ownership Opacity: The Treasury's Financial Crimes Enforcement Network (FinCEN) recently permanently revoked rules requiring U.S. companies to report beneficial ownership information, making it harder for Congress and the public to track who ultimately controls financial institutions like WLTC.

What Does WLTC's Bank License Mean for Crypto?

WLF has stated that it sought the bank license primarily to support adoption of USD1, its dollar-denominated stablecoin, a type of cryptocurrency designed to maintain a stable value pegged to the U.S. dollar. A bank license would allow WLF to bring custody services for USD1's fiat reserves in-house, rather than continuing to pay fees to third-party custodian BitGo. As of August 31, USD1 had a market capitalization of nearly $4.2 billion, making it the fifth-largest dollar-backed stablecoin, though 90% of its supply is held on Binance and its BNB Smart Chain network.

The WSJ also confirmed that WLF has a partnership with Binance to provide "marketing and promotional support" for USD1. A Binance spokesperson told the outlet that the exchange supports over 15 stablecoins from various issuers and does not offer "preferential treatment" to WLF or its products. However, the partnership's timing is notable: it was signed in December 2025, shortly after Binance CEO Changpeng "CZ" Zhao received a presidential pardon from Trump in October 2024. Additionally, in April 2025, the UAE state-run investment firm MGX took a $2 billion stake in Binance, which it chose to execute in USD1 rather than cash, significantly boosting the stablecoin's profile at a time when its market cap was only approximately $128 million.

What About Trump's Broader Crypto Portfolio and Recent Losses?

Trump's various crypto ventures, including WLF, the $TRUMP memecoin, American Bitcoin Corp (a block reward mining and Bitcoin treasury firm), and AI Financial Corp (which stockpiles WLF's governance token WLFI), have generated significant investor losses. Public Citizen, a government watchdog group, calculated in late August that these ventures had left investors with approximately $4.7 billion in losses. The $TRUMP token accounted for the bulk of these losses at $3.2 billion, followed by WLFI at $1 billion, Bitcoin treasury losses of $450 million from Trump Media and Technology Group, and at least $9.3 million from Trump's digital trading cards.

Meanwhile, Trump himself earned well over $1 billion from his crypto ventures in 2025, according to earlier reporting. This disparity between investor losses and Trump's personal gains has drawn scrutiny from watchdog organizations and lawmakers concerned about potential conflicts of interest in crypto policy.

Did Trump Launch Another Token, and What Happened?

On August 28, blockchain analytics firm Lookonchain reported that the @realtrumpcoins X (formerly Twitter) account, which is followed by Trump's official X account, announced a new Solana-based token called $GOLD. The token was also promoted via RealTrumpCoins.com, a domain Trump had previously advertised in 2024 as the exclusive place to buy Trump-themed precious metal medallions. Lookonchain noted that $GOLD's token supply appeared highly concentrated among wallets linked to the issuer, a red flag for potential manipulation.

Within days, wallets associated with the issuer dumped 224.5 million $GOLD tokens for a $312,000 profit, and the @realtrumpcoins account deleted its promotional tweets. The account then issued a statement claiming that reports of Trump Coins having "launched, promoted, or authorized a digital token are categorically false and the work of third-party bad actors," and stated it was "actively working with the appropriate authorities to investigate this matter and bring these bad actors to justice". However, days after this denial, the RealTrumpCoins.com website continued to promote $GOLD as the "Trump Foundation's" token, creating confusion about the token's official status and legitimacy.

What Are the Broader Regulatory Implications?

The removal of reputational risk from OCC and FDIC oversight criteria represents a significant shift in how U.S. banking regulators can evaluate applications from crypto-related entities and their foreign investors. By narrowing the definition of "unsafe or unsound practice" to focus only on direct financial harm, the rule eliminates a traditional safeguard that allowed regulators to consider geopolitical, security, or public interest concerns when evaluating bank ownership. This change aligns with Trump administration priorities to reduce regulatory barriers for crypto businesses, but it also raises questions about oversight of foreign government involvement in U.S. financial institutions and the effectiveness of passivity commitments as a substitute for traditional reputational review.

The simultaneous revocation of beneficial ownership reporting requirements by FinCEN further reduces transparency around who ultimately controls U.S. financial institutions, making it harder for Congress, regulators, and the public to track foreign or politically connected ownership stakes. Together, these regulatory changes have created a pathway for entities like WLTC to obtain banking licenses with foreign government backing, a development that would have faced significant regulatory obstacles under previous frameworks.