A new proposal on Curve Finance is proposing the removal of TrueUSD (TUSD), the stablecoin linked to crypto entrepreneur Justin Sun, from its list of collateral tokens for the platform’s stablecoin, Curve USD (crvUSD).
The proposal also suggests reducing the minting capacity of crvUSD using PayPal’s stablecoin, PYUSD, from $15 million to $5 million.
The proposal was submitted by “WormholeOracle” and argues that TUSD’s history of regulatory challenges and concerns over transparency make it a risky asset for underpinning crvUSD. They also point out TUSD’s involvement in legal issues, including charges by the U.S. Securities and Exchange Commission (SEC) for defrauding investors.
“crvUSD is overexposed to minor stablecoins, especially TUSD which has a dubious track record,” WormholeOracle stated. The proposal suggests fully eliminating crvUSD exposure to TUSD and emphasizes the need to diversify crvUSD’s collateral base to ensure stability.
Currently, users can mint up to $10 million worth of crvUSD using TUSD through Curve Finance’s PegKeeper liquidity pool. PegKeeper pools are critical for maintaining crvUSD’s peg to the U.S. dollar. The proposed changes aim to reduce the risk associated with collateral assets deemed unstable or unreliable.
The proposal follows ongoing scrutiny of TUSD’s backing and transparency after regulatory issues faced by TrueCoin, the original issuer of TUSD, and its sale to offshore firm Techteryx. The SEC accused TrueCoin of misleading investors, claiming that TUSD was not fully backed by U.S. dollars as advertised.
Earlier this week, TrueCoin agreed to a settlement with the SEC, which included paying fines and returning nearly $400,000 in profits, pending court approval.
Adding to these concerns were reports that TrueUSD had paused real-time attestations of its reserves. This pause led to speculations about the stablecoin’s ability to fully collateralize its tokens. However, TrueUSD later attributed this incident to internal errors.
