Curve Finance Considers Removing TrueUSD (TUSD) From Its crvUSD Stablecoin Collateral Pool After SEC Accusations

The potential decision comes in the wake of recent accusations from the U.S. Securities and Exchange Commission (SEC) against TrueCoin, the issuer of TUSD

DeFi protocol Curve Finance is considering removing TrueUSD (TUSD) from the list of assets that can be used as collateral for its crvUSD stablecoin.

This move comes after the U.S. Securities and Exchange Commission (SEC) recently accused TrueCoin, the issuer of TUSD, of violating securities laws.

The SEC alleges that a large portion of TUSD's reserves were invested in an "offshore highly speculative and illiquid investment fund" in an attempt to artificially inflate returns.

"This case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions," said Jorge G. Tenreiro, Acting Chief of the SEC's Crypto Assets & Cyber Unit.

A governance forum proposal on Curve suggests reducing the upper limit on TUSD backing for crvUSD to zero, effectively eliminating any exposure to TUSD due to the regulatory risks and solvency concerns. crvUSD is backed by a range of crypto collateral, including ether and wrapped bitcoin (WBTC).

Currently, WBTC has the largest portion of crvUSD's collateral, with over $68 million in total value locked (TVL). Wrapped staked ether (wstETH), a liquid staking derivative from Lido Finance, follows closely with around $60 million in TVL.

"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," the proposal states.

The governance proposal also suggests reducing the amount of crvUSD that can be minted using PayPal's stablecoin, PYUSD. Currently, users can mint up to $15 million in crvUSD using PYUSD, and the proposal suggests lowering this limit to $5 million to better reflect the relative importance of each PegKeeper's pool.

TrueUSD was launched in 2018 and has become a major stablecoin, maintaining its peg to the U.S. dollar with corresponding reserves held in escrow accounts. However, the recent SEC allegations have raised questions among users and investors about the stability and safety of TUSD.

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