TUSD stablecoin - is it dangerous? Curve Finance may remove it from the list of collateralized assets for crvUSD

The decentralized exchange for trading stablecoins (DEX), Curve Finance, is considering the removal of True USD (TUSD) from its list of supported (collateral) tokens for its own stablecoin, Curve USD (crvUSD). This decision is driven by concerns regarding TUSD’s stability. Additionally, there are plans to reduce the issuance of crvUSD using PayPal's stablecoin (PYUSD) from $15 million to $5 million, as outlined in a recently proposed strategy for diversification and reducing reliance on potentially risky assets.

“crvUSD is excessively dependent on less significant stablecoins, particularly TUSD, which has a questionable reputation and has recently faced accusations from the SEC of fraud against investors,” stated a user with the nickname WormholeOracle.

Currently, users can mint up to $10 million in crvUSD using TUSD through a liquidity poolA smart contract in which users deposit cryptocurrencies to support the operation of the decentralized exchange known as PegKeeper. Typically, USDC/USDT liquidity pools have been the primary and most useful within PegKeeper to maintain the peg of 1 crvUSD to $1.

The crvUSD stablecoin from Curve can be minted against several cryptocurrencies, including Ethereum (ETH) and Wrapped Bitcoin (WBTC).

What’s wrong with True USD (TUSD)?

The proposal to detach crvUSD from True USD (TUSD) came after TrueCoin, the original issuer of TUSD, faced a series of legal accusations.

On September 24, the U.S. Securities and Exchange Commission (SEC) accused TrueCoin and TrustToken of misleading investors about the stability of True USD (TUSD) while conducting risky, unregistered sales.

According to the press release, TrueCoin and TrustToken lied about TUSD being fully backed by U.S. dollars, while in reality, they invested most of the reserves in a high-risk offshore fund, with 99% of TUSD reserves tied to this speculative fund, yet the companies continued to mislead investors. TrustToken was behind a purported lending protocol called TrueFi.

The SEC claims that as early as March 2022, after TrueCoin sold its TUSD operations to an offshore company, this company, along with TrueCoin, placed over $500 million of TUSD reserves into this speculative fund.

Amid these allegations, True USD (TUSD) has become less stable and has started to lose its peg to $1. However, it remains held for now.

Incidentally, this is not the only stablecoin facing negative scrutiny. Tether, the issuer of USDT, has once again been accused of opaque operations.