Is TUSD stablecoin — dangerous? Curve Finance may remove it from the list of crvUSD collateral assets

Curve Finance, a decentralized exchange for trading stablecoins (DEX), is considering removing TrueUSD (TUSD) from the list of support tokens for its own Curve USD (crvUSD). This decision is due to concerns about the stability of TUSD. It is also planned to reduce the issue of crvUSD using the PayPal stablecoin (PYUSD) from $15 million to $5 million, as stated in the recently proposed by the diversification strategies and reducing dependence on potentially risky assets.

«crvUSD is overly dependent on smaller stablecoins, especially TUSD, which has a dubious reputation and has recently been accused by the SEC of investor fraud», — the user with the nickname WormholeOracle said in a proposal.

Currently, users can mint up to $10 million in crvUSD using TUSD through a liquidity poolA smart contract into which users deposit cryptocurrencies to support the operation of a decentralized exchange called PegKeeper. Usually, the USDC/USDT liquidity pools were the main and most useful in PegKeeper to maintain the peg of 1 crvUSD to $1.

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

What’s wrong with TrueUSD (TUSD)?

The proposal to decouple crvUSD from TrueUSD (TUSD) comes after TrueCoin, the original issuer of TUSD, faced a series of legal allegations.

On September 24, the U.S. Securities and Exchange Commission (SEC) accused TrueCoin and TrustToken that they lied to investors about the stability of TrueUSD (TUSD) while making risky, unregistered sales.

According to the press release, TrueCoin and TrustToken lied about TUSD being fully backed by US dollars, when in fact they had invested most of their reserves in a high-risk offshore fund and 99% of TUSD reserves were tied to this speculative fund, but the companies continued to mislead investors. TrustToken was behind a supposed lending protocol called TrueFi.

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

Amid accusations, TrueUSD (TUSD) is no longer as stable and has begun to lose its peg to $1. But it is still holding on.

By the way, this is not the only stablecoin that has been in the center of negative attention. Tether, the issuer of USDT, has once again accused of non-transparent activities.