Curve Finance Evaluates Removing TrueUSD Amid SEC Scrutiny

Curve Finance Considers Removing TrueUSD Amid Regulatory Concerns

In a recent announcement, Curve Finance, a prominent decentralized exchange (DEX), is mulling over the removal of TrueUSD (TUSD) from its collateral tokens for the Curve Stablecoin (crvUSD). This decision follows serious allegations against TrueCoin, the issuer of TUSD, from U.S. regulators, who have charged the company with violating securities laws.

Proposal to Reduce TUSD Backing to Zero

On September 25, a proposal was posted on Curve’s governance forum by the cross-chain messaging protocol Wormhole, suggesting a significant reduction in the upper limit on crvUSD’s TUSD backing to a complete zero. This drastic move is aimed at mitigating regulatory risks associated with TUSD and addressing concerns surrounding its solvency.

Current Use of TUSD in crvUSD Minting

The current structure of the 'PegKeeper' liquidity pool allows users to mint up to $10 million worth of crvUSD using TUSD. However, the proposed adjustments reflect a growing uncertainty regarding the stability of TUSD as a backing asset.

SEC Charges Against TrueCoin and TrustToken

On September 24, the U.S. Securities and Exchange Commission (SEC) settled charges against TrueCoin and its partner TrustToken concerning fraudulent and unregistered sales related to TrueUSD. According to the SEC's complaint, TrueCoin and TrustToken allegedly misrepresented TUSD as being fully backed by U.S. dollars or equivalent assets while a significant portion of the assets had been allocated to a speculative offshore investment fund.

The Allegations

As stated by the SEC, a staggering 99% of the reserves backing TUSD were reportedly invested in this speculative venture by September 2024. While TrueCoin and TrustToken did not admit or deny the allegations, they have agreed to final judgments prohibiting them from further violations of federal securities laws and enforcing civil penalties of $163,766 each.

Adjustments Proposed for PYUSD Minting Limits

The recent proposal also suggested an adjustment to the amount of crvUSD that could be minted with PayPal's stablecoin, PYUSD. The recommended change would lower the minting limit from $15 million to $5 million. This strategic decision is designed to ensure the reliance on various PegKeeper liquidity pools aligns correctly with the significance of their respective asset pools.

Current Composition of crvUSD's Collateral

Curve’s crvUSD stablecoin is uniquely designed to allow minting against multiple types of cryptocurrency collateral. As it stands, Ethereum (ETH) and Wrapped Bitcoin (WBTC) are among the primary backing assets. Notably, Wrapped Bitcoin constitutes the largest portion of crvUSD’s collateral backing, with over $68 million in total value locked (TVL). Following closely, Wrapped Staked Ether (wstETH), a liquid staking derivative provided by Lido Finance, ranks second with approximately $60 million in TVL.