Curve Finance, a decentralized exchange (DEX), is considering dropping TrueUSD (TUSD) from the list of tokens serving as collateral for Curve Stablecoin (crvUSD) after United States regulators charged TrueCoin, TUSDâs issuer, with securities law violations.Â
In a Sept. 25 post on Curveâs governance forum, cross-chain messaging protocol Wormhole proposed reducing the upper limit on crvUSDâs TUSD backing to zero âto fully remove exposure to TUSD due to regulatory risk and solvency concerns.âÂ
The âPegKeeperâ liquidity pool backing crvUSD permits users to mint up to $10 million worth of crvUSD with TUSD.
The proposal also suggested reducing the amount of crvUSD mintable with Paypalâs stablecoin, PYUSD, from $15 million to $5 million âso reliance on each PegKeeper is suitable for the significance of the respective pool.âÂ
On Sept. 24, the US Securities and Exchange Commission (SEC) settled charges against TrueCoin and TrustToken for fraudulent and unregistered sales of investment contracts involving TrueUSD.
Current crvUSD backings and proposed changes. Source: Curve
Among other charges, the SECâs complaint alleges âTrueCoin and TrustToken falsely marketed the investment opportunity as safe and trustworthy by claiming that TUSD was fully backed by U.S. dollars or their equivalent,â according to a Sept. 24 announcement.
â[I]n fact a substantial portion of the assets purportedly backing TUSD had been invested in a speculative and risky offshore investment fund to earn additional returns for the defendants,â the SEC said.Â
The complaint alleges that â99% of the reserves backing TUSD were invested in the speculative fundâ as of September 2024.Â
TrueCoin and TrustToken did not admit or deny the allegations but consented to final judgments enjoining them from further violations of applicable federal securities laws and requiring them to pay civil penalties of $163,766 each.
Top crvUSD collateral tokens. Source: Curve
Curveâs crvUSD stablecoin is mintable against several types of cryptocurrency collateral, including Ethereum (ETH) and Wrapped Bitcoin (WBTC).Â
At more than $68 million in total value locked, WBTC makes up the greatest portion of crvUSDâs collateral backing. Wrapped Staked Ether (wstETH) â a liquid staking derivative issued by Lido Finance â comes in second, at around $60 million in TVL, according to Curveâs documentation.Â
âcrvUSD is overexposed to minor stablecoins, especially TUSD which has a dubious track record and has recently been charged by the SEC with defrauding investors,â the Sept. 25 proposal said.Â
âUltimately Curve requires a strong diversity of PegKeepers, but that is another discussion.â
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