Curve Finance, a leading decentralized exchange (DEX) for stablecoin trading, is considering removing TrueUSD (TUSD) as collateral for its native stablecoin, Curve USD (crvUSD). The move comes after growing concerns over TUSD’s regulatory and transparency issues, including recent charges by the U.S. Securities and Exchange Commission (SEC) accusing TrueUSD’s original issuer of defrauding investors.
The proposal, submitted by a user named WormholeOracle, suggests reducing the upper limit for TUSD backing crvUSD to zero, meaning TUSD would no longer be allowed to support the issuance of crvUSD. The proposal also recommends reducing crvUSD’s minting capacity using PayPal’s stablecoin, PYUSD, from $15 million to $5 million to better diversify collateral assets.
“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,” WormholeOracle wrote in the proposal. They added that TUSD has struggled with peg stability and transparency issues compared to other stablecoins supported by the PegKeeper mechanism—a liquidity pool used to maintain crvUSD’s $1 peg.
Currently, up to $10 million worth of crvUSD can be minted using TUSD. Curve Finance’s governance system, run by CRV token holders, will now review and vote on the proposal.
The discussion around removing TUSD is part of a larger strategy to reduce risk and ensure stability within crvUSD. This comes in the wake of TrueCoin, TUSD’s original issuer, facing legal action from the SEC for offering unregistered securities through its TrueFi platform. The SEC alleged that TUSD was not fully backed by U.S. dollars as claimed, with nearly all reserves allegedly invested in a speculative offshore fund.
TrueCoin has since agreed to pay a fine of $163,766, and the company will return almost $400,000 in profits and interest, pending approval from a federal court. Techteryx, an offshore firm, now oversees TUSD after acquiring it from TrueCoin, though regulatory scrutiny remains.
If passed, the proposal could mark a significant shift in how crvUSD is backed, reducing reliance on assets with questionable regulatory standing and aiming to create a more balanced and stable ecosystem for Curve Finance users.
