Curve Finance is considering removing TrueUSD (TUSD) from its crvUSD collateral list in response to allegations made by the U.S. Securities and Exchange Commission (SEC) against TUSD issuer TrueCoin for violating securities laws, which include breaches of investment commitments and unregistered sales.
(Background: Is there a conspiracy behind the CRV crash? A million tokens locked for just one day were sold off, prompting a swift clarification from Curve’s founder.)
**Table of Contents:**
– Proposal to Remove TUSD as Collateral
– SEC Accusations Against TrueCoin for Fraudulent Investment
– Concerns Over crvUSD Collateral Diversity
– Binance Faces Another Setback
Decentralized exchange Curve Finance is contemplating the removal of TrueUSD (TUSD) from its stablecoin crvUSD collateral list due to recent allegations against TUSD’s issuer, TrueCoin, by U.S. regulatory authorities regarding violations of securities laws.
On the 25th, a new proposal was presented on the Curve governance forum by the cross-chain protocol Wormhole, suggesting that the cap on TUSD in the crvUSD collateral pool be reduced to zero. Wormhole stated that this move aims to “completely eliminate risks arising from regulatory concerns and solvency issues.”
Reducing the TUSD PegKeeper debt limit to 0. Source: Curve
Currently, Curve’s “PegKeeper” liquidity pool allows users to mint up to $10 million in crvUSD using TUSD. The proposal also suggests reducing the amount of crvUSD that can be minted using PayPal’s stablecoin PYUSD from $15 million to $5 million to align with the relative risk of each PegKeeper.
Prior to this, on September 24, the SEC announced a settlement with TrueCoin and its parent company TrustToken regarding unregistered sales and false investment commitments. The SEC accused TrueCoin and TrustToken of misleading investors by claiming that TUSD was fully backed by U.S. dollars, when in fact, up to 99% of the reserves were invested in high-risk offshore investment funds, leading to allegations of fraud against investors.
According to the SEC announcement, TrueCoin and TrustToken neither admitted nor denied the allegations but agreed to pay civil fines of $163,766 each. TrueCoin agreed to pay $340,930 in illegal gains and $31,538 in pre-judgment interest and consented to comply with a future injunction prohibiting further violations of relevant securities laws.
Top crvUSD collateral tokens. Source: Curve
In addition to TUSD, Curve’s crvUSD stablecoin supports a variety of cryptocurrencies as collateral. According to official documents from Curve, Wrapped Bitcoin (WBTC) currently constitutes the largest portion of crvUSD collateral, with a total locked value exceeding $68 million. Wrapped Staked Ether (wstETH), issued by Lido Finance, is the second-largest collateral, with a locked value of approximately $60 million.
This proposal indicates that crvUSD’s reliance on smaller stablecoins like TUSD is excessively high, especially considering TUSD’s recent regulatory penalties for involvement in fraudulent activities. It further emphasizes that “Curve needs a more diversified PegKeeper to mitigate risks.”
The proposal is currently under discussion within the Curve community and requires further voting to determine its implementation.
On February 13 of last year, it was reported that after the New York State Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD, TUSD became a new option for Binance, allowing TUSD as collateral for new coin mining on the Launchpool, along with promotions for zero trading fees on current orders, which rapidly boosted TUSD’s issuance.
However, by the end of last year, Binance had suspended support for TUSD on Launchpool due to transparency issues and community disputes involving the project, leading to a significant outflow of TUSD liquidity. By mid-February, TUSD experienced a decoupling phenomenon.
The chart below clearly shows that TUSD’s market capitalization has rapidly shrunk since the end of last year, now dropping below $500 million, with issuance levels regressing to 2021 standards. It may be quite challenging for TUSD to regain its former glory amidst diminished user trust.
**Further Reading:**
The stablecoin TUSD rebounds to $0.99: TrueUSD currently has reserves at 101%, audited by Moore HK.
Is there hope for WBTC? Can signature reward pool activities supported by Curve and Synthetix succeed?
Is there a conspiracy behind the CRV crash? A million tokens locked for just one day were sold off, prompting a swift clarification from Curve’s founder.