FX168 Financial News Agency (Asia Pacific) reported that TrueUSD (TUSD) US dollar stablecoin was accused by the US Securities and Exchange Commission (SEC) of unregistered sales and false investment promises. In the Asian market at noon on Thursday (September 26), TUSD decoupled from the US dollar fiat currency in the short term, falling to $0.9981. Decentralized exchange Curve Finance removed TUSD from its stablecoin crvUSD collateral. Following BUSD's encounter with US regulation, Binance Exchange stepped on the thunder for the second time and has now stopped its Launchpool support for TUSD.
On Wednesday at the Curve Finance governance forum, the cross-chain protocol Wormhole proposed a new proposal to reduce the upper limit of TUSD in the crvUSD collateral pool to 0, which means that TUSD will no longer be used as a reserve.
Source: Curve
Wormhole explained that the move was to "completely eliminate the risks caused by regulatory risks and solvency issues."
This triggered panic in the market, and TUSD broke away from the 1:1 anchor with the US dollar fiat currency and fell to $0.9981 on Thursday.
Source: CoinMarketCap
Currently, Curve's PegKeeper liquidity pool allows users to mint up to $10 million of crvUSD through TUSD. The proposal also suggests reducing the amount of crvUSD that can be minted by PayPal's stablecoin PYUSD from $15 million to $5 million to match the relative risk of each PegKeeper.
Prior to this, the SEC announced on Tuesday that it had reached a settlement with TrueCoin and its parent company TrustToken over unregistered sales and false investment promises.
The SEC accused TrueCoin and TrustToken of misleading investors, claiming that TUSD is fully backed by the US dollar. In fact, up to 99% of the reserves were invested in high-risk offshore investment funds, suspected of defrauding investors.
According to the SEC announcement, TrueCoin and TrustToken did not admit or deny the charges, but agreed to pay a civil penalty of $163,766 each. TrueCoin has agreed to pay $340,930 in illegal gains and $31,538 in prejudgment interest, and agreed to comply with the ban on violating relevant securities laws again in the future.
In addition to TUSD, Curve's crvUSD stablecoin also supports a variety of cryptocurrencies as collateral. According to Curve's official documents, Wrapped Bitcoin (WBTC) is currently the largest part of crvUSD collateral, with a total locked value of more than $68 million.
Wrapped Staked Ether (wstETH), a liquid pledge derivative issued by Lido Finance, is the second largest collateral, with a locked value of approximately $60 million.
The proposal points out that crvUSD is too dependent on small stablecoins such as TUSD, especially TUSD, which was recently punished by the US Securities and Exchange Commission for fraud, so it further emphasizes that Curve needs a more diversified PegKeeper to reduce risks.
The proposal is currently being discussed within the Curve community and further voting is required to decide whether to implement it.
Looking back to February 13, 2023, after the New York State Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD, TUSD became a new option for Binance. TUSD can be selected as collateral on the new coin mining Launchpool, and there is also a zero-fee activity for placing orders, which helps to boost the issuance of TUSD in a short period of time.
However, by the end of 2023, Binance had suspended support for TUSD on Launchpool. At that time, the project had disputes over transparency and holders in the community, and TUSD liquidity began to flow out in large quantities. In mid-February, TUSD even decoupled.
The figure below clearly shows that the market value of TUSD has been shrinking rapidly since the end of 2023, and is currently less than US$500 million. The issuance volume has declined back to the level of 2021. It may take severe challenges to restore investor trust in the future.
Source: CoinGecko
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