Curve mulls dropping TUSD as crvUSD backing after SEC charges
2024-09-26

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, TUSD’s issuer, with securities law violations. 
In a Sept. 25 post on Curve’s governance forum, cross-chain messaging protocol Wormhole proposed reducing the upper limit on crvUSD’s TUSD backing to zero “to fully remove exposure to TUSD due to regulatory risk and solvency concerns.” 
The ‘PegKeeper’ 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 Paypal’s stablecoin, PYUSD, from $15 million to $5 million “so reliance on each PegKeeper is suitable for the significance of the respective pool.” 
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.
Among other charges, the SEC’s complaint alleges “TrueCoin 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,” according to a Sept. 24 announcement.
“[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,” the SEC said. 
The complaint alleges that “99% of the reserves backing TUSD were invested in the speculative fund” as of September 2024. 
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.
Curve’s crvUSD stablecoin is mintable against several types of cryptocurrency collateral, including Ethereum ETHUSD and Wrapped Bitcoin (WBTC). 
At more than $68 million in total value locked, WBTC makes up the greatest portion of crvUSD’s collateral backing. Wrapped Staked Ether (wstETH) — a liquid staking derivative issued by Lido Finance — comes in second, at around $60 million in TVL, according to Curve’s documentation. 
“crvUSD is overexposed to minor stablecoins, especially TUSD which has a dubious track record and has recently been charged by the SEC with defrauding investors,” the Sept. 25 proposal said. 
“Ultimately Curve requires a strong diversity of PegKeepers, but that is another discussion.”