FDUSD Stablecoin Depegged, Raising Concerns About Hong Kong's Regulatory Framework

FDT, the issuer behind the FDUSD stablecoin, reportedly faces insolvency and has halted client fund redemptions, sparking significant concern

First Digital Trust (FDT), the issuer of the FDUSD stablecoin, is reportedly facing insolvency and has halted client fund redemptions, according to a report by the Korea Economic Daily. The development comes as the cryptocurrency industry grapples with increasing instability in the stablecoin sector.

The report claims that FDT, a company registered in Hong Kong, has become insolvent and is unable to process requests for the withdrawal of client funds. The report also noted that the company is currently handling requests for the return of user assets.

However, FDT’s inability to meet these requests and the broader financial distress faced by the company have raised significant concerns about potential vulnerabilities within Hong Kong’s financial trust framework and its broader regulatory infrastructure.

These issues arise as the FDUSD stablecoin, which is marketed with promises of transparency and security, has seen its price drop to $0.9700 on Binance. The token has recovered slightly to trade at $0.9900 at the time of writing.

A recent 4-hour trading window on Binance saw a massive sell-off in the token, with volumes of over 287 million tokens sold in the period. The token has also persistently traded below its peg, showing minor depreciation over multiple timeframes (7 to 365 days).

FDUSD is currently trading at $0.964870, showing a daily decline of 3.35% and a 24-hour volume over $7 billion. The token’s price activity and volume are crucial as it is marketed on promises of stability.

Earlier reports noted that Tron founder Justin Sun stepped in to stabilize TrueUSD (TUSD) after $456 million in its reserves were temporarily inaccessible. While TUSD and FDUSD are distinct entities, both have seen promotion within similar crypto circles, including connections to Binance leadership.

These issues add another layer of complexity as interdependency between these stablecoins could increase systemic risk.

First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions. I strongly recommend that users take immediate action to secure their assets.

There are significant loopholes in both the trust licensing process in Hong Kong and the internal risk management practices that have led to the current situation with FDT. These failures by the company and the lack of response from the authorities have raised serious questions about the effectiveness of existing oversight mechanisms.

Left unaddressed, such lapses could erode confidence in Hong Kong’s financial integrity and tarnish its reputation as a global financial hub. The lack of official intervention thus far has also fueled public frustration.

At present, the official website of First Digital Trust is still accessible, and the company's social media channels remain active. However, email correspondence with the company has not yet elicited a response.

A press conference is scheduled for tomorrow at 2 PM HKT, where officials from the Hong Kong Monetary Authority (HKMA) and the banking regulator are expected to provide further clarification on the matter.