According to Cointelegraph, Curve Finance, a decentralized exchange (DEX), is contemplating the removal of TrueUSD (TUSD) from its list of collateral tokens for Curve Stablecoin (crvUSD) following charges against TrueCoin, TUSD’s issuer, by United States regulators for securities law violations.
In a post dated September 25 on Curve’s governance forum, cross-chain messaging protocol Wormhole proposed reducing the upper limit on crvUSD’s TUSD backing to zero. This move aims to eliminate exposure to TUSD due to regulatory risks and concerns about solvency. The 'PegKeeper' liquidity pool currently allows users to mint up to $10 million worth of crvUSD using TUSD.
The proposal also suggested lowering the amount of crvUSD that can be minted with Paypal’s stablecoin, PYUSD, from $15 million to $5 million. This adjustment is intended to ensure that reliance on each PegKeeper is appropriate for the significance of the respective pool.
On September 24, the US Securities and Exchange Commission (SEC) settled charges against TrueCoin and TrustToken for fraudulent and unregistered sales of investment contracts involving TrueUSD. The SEC’s complaint alleges that TrueCoin and TrustToken falsely marketed TUSD as fully backed by U.S. dollars or their equivalent, while a substantial portion of the assets backing TUSD had been invested in a speculative offshore investment fund.
The SEC claims that as of September 2024, 99% of the reserves backing TUSD were invested in this speculative fund. TrueCoin and TrustToken did not admit or deny the allegations but agreed to final judgments that enjoin them from further violations of federal securities laws and require them to pay civil penalties of $163,766 each.
Curve’s crvUSD stablecoin can be minted against various types of cryptocurrency collateral, including Ethereum (ETH) and Wrapped Bitcoin (WBTC). WBTC constitutes the largest portion of crvUSD’s collateral backing, with more than $68 million in total value locked (TVL). Wrapped Staked Ether (wstETH), a liquid staking derivative issued by Lido Finance, is the second-largest collateral, with around $60 million in TVL.
The September 25 proposal highlighted that crvUSD is overexposed to minor stablecoins, particularly TUSD, which has a questionable track record and has recently been charged by the SEC with defrauding investors. The proposal emphasized the need for a strong diversity of PegKeepers for Curve, although it noted that this is a separate discussion.
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