Curve considers removing TUSD from crvUSD after SEC charges

Curve Finance, a decentralized exchange, is evaluating whether to remove TrueUSD (CRYPTO:TUSD) as collateral for its stablecoin, crvUSD (CRYPTO:CRVUSD), following charges against TUSD’s issuer, TrueCoin, by the U.S. Securities and Exchange Commission (SEC). 

The SEC alleges that TUSD was falsely marketed as fully backed by U.S. dollars, with 99% of its reserves actually invested in a speculative offshore fund. 

According to a proposal posted on Curve’s governance forum on September 25, cross-chain messaging protocol Wormhole suggested reducing the TUSD backing of crvUSD to zero, citing regulatory risks and concerns over solvency. 

The PegKeeper liquidity pool currently allows up to $10 million worth of crvUSD to be minted using TUSD, but the new proposal calls for the complete removal of this exposure. 

The SEC’s complaint, announced on September 24, claims that TrueCoin and TrustToken misrepresented TUSD as a safe investment. 

The SEC alleged, “A substantial portion of the assets purportedly backing TUSD had been invested in a speculative and risky offshore investment fund.” 

Both companies settled the charges, agreeing to pay penalties of $163,766 each without admitting or denying the allegations. 

In addition to reducing TUSD exposure, the proposal also suggests lowering the amount of crvUSD that can be minted with PayPal’s stablecoin, PYUSD (CRYPTO:PYUSD), from $15 million to $5 million. 

This adjustment aims to ensure a balanced reliance on each PegKeeper pool. 

Currently, crvUSD is backed by a variety of cryptocurrencies, with Wrapped Bitcoin (CRYPTO:WBTC) accounting for over $68 million in total value locked (TVL), the largest portion of its collateral. 

Wrapped Staked Ether (wstETH), a liquid staking derivative, holds the second-largest share at around $60 million. 

The proposal concludes that crvUSD is overly reliant on minor stablecoins like TUSD, stating, “Curve requires a strong diversity of PegKeepers.” 

At the time of reporting, the crvUSD price was $0.9995, and the TrueUSD price was $0.9988.