- Curve Finance is considering removing TrueUSD (TUSD) as collateral for its crvUSD stablecoin following SEC charges against TUSD’s issuer, TrueCoin
- The SEC alleges that TUSD was backed by risky offshore investments rather than U.S. dollars, raising solvency concerns
- A governance proposal suggests reducing crvUSD’s reliance on TUSD and other minor stablecoins
Curve Finance is reviewing the use of TrueUSD (TUSD) as collateral for its crvUSD stablecoin after U.S. regulators charged TUSD’s issuer, TrueCoin, with securities violations. The U.S. Securities and Exchange Commission (SEC) claims that TrueCoin falsely marketed TUSD as fully backed by U.S. dollars while much of its reserves were invested in speculative offshore funds. The Curve governance forum has proposed eliminating TUSD exposure due to these concerns, with the proposer warning of TUSD’s “dubious track record.”
Call for Reduction of Reliance on Minor Stablecoins
The SEC’s investigation this week revealed that 99% of TUSD reserves were tied to risky investments, rather than the U.S. dollar as advertised, leading to TrueCoin and TrustToken paying a combined $536,000 in settlements and disgorgement.
This news has prompted Curve’s consideration of removing TUSD to mitigate regulatory and solvency risks in the form of a proposal posted yesterday entitled “Reduce TUSD Pegkeeper Debt Ceiling to 0 and pyUSD to 5m.”
The proposer, WormHole Oracle, warns that TUSD “has a dubious track record and has recently been charged by the SEC with defrauding investors” and calls for Curve to reduce reliance on minor stablecoins, starting with TUSD, which had been previously used as collateral for minting crvUSD.
PayPal USD Also Faces Action
Curve’s PegKeeper system, which supports crvUSD, currently allows up to $10 million in crvUSD to be minted using TUSD as backing. However, this may change, as Curve’s decision is still under discussion.
Another stablecoin, PayPal USD (PYUSD), also faces reduced collateral backing, with a proposed decrease from $15 million to $5 million. The proposal highlights Curve’s goal of diversifying its collateral to avoid overreliance on minor stablecoins that might present similar risks.
