Curve Finance is considering dropping TrueUSD from the crvUSD guarantee

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A new proposal for Curve Finance suggests removing TrueUSD (TUSD) as collateral for its stablecoin, crvUSD, due to concerns about TUSD’s stability and regulatory issues.

The proposal, presented by a user named “WormholeOracle” on Curve Finance’s governance forum, recommends reducing the upper limit of TUSD support for crvUSD to zero. This would effectively eliminate TUSD as a collateral option for the protocol’s stablecoin. In addition, the proposal suggests lowering the ability to mint crvUSD with PayPal’s PYUSD from $15 million to $5 million.

“crvUSD is overexposed to minor stablecoins, particularly TUSD, which has a questionable track record and was recently indicted by the SEC for defrauding investors,” the proposal wrote. The move is aimed at diversifying crvUSD collateral and reducing reliance on potentially risky assets.

This proposal comes in the wake of regulatory actions against TrueCoin, the original issuer of TUSD. The SEC recently accused TrueCoin of defrauding investors by not fully backing TUSD with US dollars. The case resulted in a settlement involving fines and restitution of profits.

The situation highlights the challenges decentralized finance protocols face 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 adopted, this proposal could affect the utility of TUSD within the DeFi ecosystem and influence future collateral strategies for other stablecoin projects.

In early January, TrueUSD (TUSD) fell significantly to $0.97 amid net outflows of $174 million on Binance due to eroding market confidence. TrueUSD destabilized further, falling below its $1 level at $0.985 with net outflows of $66.1 million on Binance following a hacking incident at Poloniex.

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