TrueUSD stablecoin depegs following CZ’s exit from Binance

November 28, 2023 08:52 PM AEDT | By Invezz
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TrueUSD (TUSD), a stablecoin with a market cap exceeding $3.1 billion, has faced a significant de-pegging, dropping to as low as $0.995.

This downturn coincided with the exit of Changpeng “CZ” Zhao as the CEO of Binance, the world’s largest cryptocurrency exchange. The price volatility intensified as concerns grew, leading to increased liquidation of TrueUSD holdings.

TrueUSD stability concerns amid CZ’s exit

TrueUSD’s stability came into question as large sell orders flooded the market following the departure of Binance’s CEO CZ, triggering a substantial drop in its price. Notably, the largest sell order amounted to $3 million in a single transaction, contributing to the shakeup in TrueUSD’s peg.

Riyad Carey, a researcher at Kaiko, reported that TrueUSD’s peg appeared shaky due to significant market order sell-offs.

The concerns around Binance, a major supporter of TrueUSD, are seen as one of the main contributors to the increased liquidations of the stablecoin.

Despite various attempts, TrueUSD has struggled to restore its peg, currently trading at $0.996.

TrueUSD price chart

The last major TrueUSD depeg occurred in June 2023 after Prime Trust paused TrueUSD minting. Prime Trust, a fintech infrastructure provider based in Nevada was at the time acting as a middleman for Binance.US, holding the exchange’s customer funds through banking partners.

What is TrueUSD (TUSD)?

TrueUSD (TUSD) stands as the first digital asset with live on-chain attestations by independent third-party institutions. Issued by ArchBlock (formerly TrustToken), TUSD is backed 1:1 with the US dollar and has achieved a market presence on more than 100 trading platforms, including Binance and Huobi.

TUSD operates on various blockchains, including Ethereum and Binance Chain, providing users with flexibility across different networks.

How is TrueUSD connected to Binance?

Besides the fact that TrueUSD runs on the Binance Chain, Binance on March 17, 2023, announced that it was replacing the Binance USD (BUSD) holdings in its Secure Asset Fund for Users (SAFU) with Tether (USDT) and TrueUSD (TUSD). Binance’s SAFU wallets initially consisted of Bitcoin (BTC), BNB (BNB), and Binance USD (BUSD), which has since been replaced by TUSD and USDT.

The move to replace BUSD with TUSD and USDT came after Paxos stopped minting new BUSD in accordance with the directions of and in coordination with the New York Department of Financial Services.

Interestingly, days after reports emerged that United States regulators were scrutinizing Paxos and BUSD, Binance between February 14 and February 16, 2023, minted nearly $50 million worth of TUSD.

At the moment, almost 90% of the stablecoin’s circulating supply is held on Binance. Although TUSD constitutes about 4.27% of Binance’s TVL, the exchange’s TVL has TUSD worth approximately $2.84B according to data from DefiLlama as shown in the screenshot below.

Amount of TUSD in Binance’s TVL

Seeing that Binance plays a crucial role in the TrueUSD ecosystem. The recent developments at Binance, including the exit of CZ and increased regulatory scrutiny, have directly affected TrueUSD’s price and stability.

The exit of CZ from Binance comes after a settlement with the US Department of Justice (DOJ), where he pleaded guilty to charges related to the alleged operation of an anti-money laundering system. The SEC is now investigating whether CZ still has a ‘backdoor’ access to user funds in Binance US.

While it is unclear whether TUSD will drop to the lows observed after the June 10 de-pegging, Traders are carefully watching the Binance-SEC saga unfold, especially after news that the SEC was still probing Binance US for FTX-like fraud.

The post TrueUSD stablecoin depegs following CZ's exit from Binance appeared first on Invezz


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