Curve Finance to Remove TrueUSD as Collateral for its Stablecoin

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Curve Finance, a decentralized exchange (DEX) liquidity pool for trading stablecoins, has proposed removing TrueUSD (TUSD) as collateral for its stablecoin, crvUSD. In a recent proposal, the platform recommended reducing the backing limit of TUSD to zero. This move aligns with Curve’s broader strategy to mitigate risks associated with potentially unstable assets.

Curve Finance to Protect the Value of its Stablecoin

The proposal comes amid growing concerns within the crypto space about the stability of certain stablecoins, with TUSD facing scrutiny over its regulatory standing and potential volatility. By reducing TUSD’s backing limit, Curve Finance aims to protect the value of crvUSD and ensure the platform remains resilient against external shocks.

In addition to removing TUSD as collateral, Curve also suggested decreasing the minting capacity of crvUSD using PayPal’s PYUSD. Users can mint up to $15 million crvUSD with PYUSD, but the proposal recommends reducing this limit to $5 million. This reduction forms part of Curve’s strategy to diversify collateral sources. It will also help to reduce its reliance on single assets that may carry heightened risks.

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Users can mint up to $10 million worth of crvUSD using TUSD via the PegKeeper liquidity pool. This initiative underscores Curve Finance’s commitment to ensuring a robust, diversified collateral pool for crvUSD.

Curve Finance Reimburse Users Post-Hack

Last year, the DeFi platform made a formal statement to repay its users affected by an attack, which resulted in $62 million in losses. As reported by TheCoinRise, about 79% of the funds on Curve Finance have been successfully restored. Recall that some hackers took advantage of flaws in the publicly available history of Cruve Finance’s Vyper compiler.

The attackers targeted Vyper compiler versions 0.2.15 through 0.3.0. A Viper writer speculated that the criminal act had been presumable plotted weeks before the day it was executed. CRV/ETH, alETH/ETH, msETH/ETH, and pETH/ETH were part of the funds exploited. However, a white hacker retrieved 2,879 Ether from an exploiter and returned it to Curve Finance.

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Stablecoin Crackdown is Real

In 2023, the Binance exchange minted $50 million worth of TrueUSD (TUSD) from the TrustToken platform’s smart contract. This data was revealed days after the US Securities and Exchange Commission (SEC) ordered Paxos Trust to stop issuing BUSD tokens.

Meanwhile, Binance ex-CEO Changpeng Zhao stated that the regulatory pressure implemented by regulators may result in a decline in the popularity of stablecoins. As such, Binance started exploring other stablecoins for the platform.