Curve Finance Considers Removing TrueUSD (TUSD) as Collateral for crvUSD

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

A proposal on Curve Finance's governance forum has suggested removing TrueUSD (TUSD) as collateral for its stablecoin, crvUSD, due to concerns over TUSD's stability and regulatory issues.

The proposal, submitted by a user named “WormholeOracle,” points to recent SEC charges against TrueCoin, the original issuer of TUSD, for defrauding investors by not fully backing the stablecoin with U.S. dollars. The case was settled with fines and the return of profits.

“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 proposer wrote. The move aims to diversify crvUSD's collateral and reduce reliance on potentially risky assets.

The proposal would reduce the upper limit on TUSD backing for crvUSD to zero, effectively eliminating it as a collateral option for the protocol's stablecoin. It also suggests decreasing the minting capacity of crvUSD with PayPal's PYUSD from $15 million to $5 million.

This proposal 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 passed, this proposal could impact TUSD's utility within the DeFi ecosystem and influence future collateral strategies for other stablecoin projects.