Curve Finance might fully remove TUSD and reduce exposure to pyUSD

Curve Finance proposed the complete removal of TUSD from the crvUSD ecosystem after the US SEC charged TrueCoin with investor fraud. In addition, the DEX proposed reducing the overreliance on PayPal’s pyUSD as collateral.

The proposal was published yesterday on Curve Finance’s community forum. Removing TUSD from the crvUSD ecosystem is expected to protect the DEX from the consequences of possible solvency of TrueCoin.

Currently, the debt ceiling for TUSD Pegkeeper is $10 million with a TVL pool of $556k and its debt ceiling to TVL ratio is 17.99. On the other hand, the debt ceiling for pyUSD PegKeeper is $15m with a TVL pool of $963k and its debt ceiling to TVL ratio is 15.58.

The proposal stated that pyUSD has a high debt ceiling to TVL ratio compared to other stablecoins, such as USDT and USDC, which have ratios of 2.58 and 1.98, respectively. This means the amount of crvUSD which can be minted against pyUSD is larger than the pool size which can imbalance the system.  

crvUSD can be minted against other coins such as WETH, WBTC, and wstETH. According to Dune , crvUSD has a total value locked of almost $69 million. WBTC takes the lead with the highest collateral of more than $33.2 million, followed by WETH with $32 million. 

TUSD has a bad track record

The proposal aims to diversify the Pegkeepers of Curve Finance. The ecosystem is overexposed to small stablecoins such as TUSD which has a questionable record.

Earlier this year, TUSD got depegged after users dumped a staggering amount of $330M. In June 2023, TUSD experienced another depeg event after its price slid to $0.80. TUSD has experienced depegging many times over the past years. 

In July, Binance announced the delisting of TUSD from its cross and isolated margin trading. The exchange removed the cross margin pairs of BTC/TUSD and TUSD/USDT and isolated margin pairs of BTC/TUSD and TUSD/USDT completely. 

Days ago, the US SEC filed a lawsuit against TrueCoin, alleging that it defrauded investors and misled them about the stability of TUSD. The stablecoin issuer claimed that TUSD was backed by the US dollars but it turned out that the reserves were invested in a high-risk offshore fund. Almost 99% of the funds backing TUSD were invested in the off-shore fund.

Currently, TUSD has a price of $0.99 and a market cap of $494 million. The coin has a 24-hour trading volume of $16 million according to CoinGecko.