TrueUSD struggles to maintain peg, drops to $0.97 amid negative net outflows

The TrueUSD (TUSD) stablecoin dropped to around $0.97 on Thursday morning, drifting below its intended 1:1 peg to the US dollar. This latest decline comes after TUSD fell as low as $0.97 earlier this week, sparking a sell-off from holders. 

According to exchange data from Binance, traders have sold approximately $305 million worth of TUSD over the past day against only $129 million in buys. This net outflow of $174 million reflects eroding confidence in TrueUSD amid its failure to maintain its peg. The accelerated outflows suggest demand struggles to match rampant selling pressure.   

Market confidence took a further hit last week when TrueUSD paused its real-time attestations of reserves sometime around January 11, 2024. This led to suspicions about the stablecoins’ inability to collateralize its token supply fully. Notably, in June 2023, the stablecoin also temporarily halted its automated attestations as it faced balance discrepancies, a week after its developers acknowledged glitches.

In response, TrueUSD announced it has upgraded its fiat reserve audit and attestation system in partnership with accounting firm MooreHK. The stablecoin issuer claims the new reports will include more details on funds its financial and fiduciary partners hold. 

Data from TrueUSD’s official website claims that it has $1.93 billion in total assets held in reserve accounts. In response to crypto news platform Protos’ investigation, TrueUSD stated that the ‘Balances’ ripcord “was accidentally triggered by reserve fund movements between banks and it has been fixed.”

However, critics like Adam Cochran have argued since at least July last year that TrueUSD has failed to provide satisfactory proof around its reserves and redemption mechanisms — key to maintaining trust and redeemability. Competing stablecoins have also eroded its market share. 

TrueUSD has known associations with Tron founder Justin Sun. On-chain analysis indicates a wallet linked to Sun recently transferred over $60 million to crypto exchange Binance shortly before TrueUSD recovered back toward its $1 parity. The links to Justin Sun for this specific wallet have yet to be confirmed outside of its label from Arkham Intelligence. 

The recent decline coincided with rival stablecoin FDUSD entering a Binance staking program. Justin d’Anethan, head of APAC business development of crypto market maker Keyrock, told crypto news platform The Block that “it seems that a horde of investors are selling” TUSD for FDUSD to participate in Binance’s rewards programs. This trend could be a catalyst in TrueUSD’s de-pegging.

Global regulators demand increased transparency and enforceable redemption rights over stablecoin markets, which now exceed a $134 billion market capitalization. Regulators caution that even isolated failures could quickly spiral.

A precedent behind this supposed urgency for regulation is Circle’s USDC, another stablecoin that faced parity loss issues. Last spring, Circle’s USDC stablecoin briefly lost parity when key banking partner Silicon Valley Bank failed. Concurrently, regulators halted Signature Bank operations.

At the time, Circle maintained $3.3 billion in USDC reserves between the two institutions, making redemptions difficult. The temporary loss of redemption infrastructure and collateral access disrupted USDC’s dollar peg.