Key points
- Curve Finance's proposal could end TrueUSD's role as collateral for crvUSD.
- The proposal suggests that Curve Finance's move is aimed at reducing crvUSD's exposure to potentially risky assets.
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A new one proposal Curve Finance suggests removing TrueUSD (TUSD) as collateral for its stablecoin, crvUSD, due to concerns about TUSD stability and regulatory issues.
The proposal, submitted by a user named “WormholeOracle” on Curve Finance’s governance forum, recommends reducing the upper limit of TUSD backing for crvUSD to zero. This would effectively remove TUSD as a collateral option for the protocol’s stablecoin. Additionally, the proposal suggests decreasing PayPal’s minting capacity of crvUSD with PYUSD from $15 million to $5 million.
“CrvUSD is overexposed to minor stablecoins, especially TUSD, which has a dubious track record and has recently been accused by the SEC of defrauding investors,” the proponent wrote. The move aims to diversify crvUSD collateral and reduce reliance on potentially risky assets.
This proposal comes in the wake of regulatory action against TrueCoin, the original issuer of TUSD. The SEC recently… TrueCoin loaded for defrauding investors by failing to fully back TUSD with US dollars. The case resulted in a settlement that included fines and the disgorgement of profits.
The situation highlights the challenges faced by decentralized finance protocols in maintaining stability and regulatory compliance. By potentially removing TUSD as collateral, Curve Finance demonstrates the responsiveness of decentralized governance to external regulatory actions and market conditions.
If approved, this proposal could impact the utility of TUSD within the DeFi ecosystem and influence future collateralization strategies for other stablecoin projects.
In early January, TrueUSD (TUSD) decoupled significantly, reaching $0.97 amid net outflows of $174 million on Binance due to eroding market confidence. TrueUSD destabilizedfalling below its $1 value to $0.985 with net outflows of $66.1 million on Binance, following a hacking incident on Poloniex.
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