In the past few days, the crypto community has received much optimistic news, such as the new SEC approval of leveraged Bitcoin ETF. But it seems the negativities are back after a crypto analyst questioned the authenticity of TUSD after the stablecoin depegged.
Within the crypto industry, a stablecoin depegging is a significant concern as it can result in an immediate bear market. When a stablecoin is unable to maintain its peg with fiat, it is considered depegged.
For instance, if a stablecoin is pegged to the US dollar, it should maintain the same value as the fiat currency. However, if the stablecoin, such as TUSD, depegs, it no longer holds the same value as the US dollar. This issue is causing worry within the crypto industry.
Before the TUSD depeg happened, the stablecoin had been heavily criticized by many experts. However, it seemed their partnership with Binance and becoming the most important trading pair for Bitcoin made the criticism become worse.
The TrueUSD Binance partnership is more of support as the crypto exchange has its own stablecoin, BUSD. According to many allegations, the founder of Tron Justin Sun is also the owner of TUSD. But these allegations have not been proven.
The official emitter (Techteryx) has denied these rumors and has even threatened to sue those propagating these rumors with defamation lawsuits. The critics of this stablecoin are mainly asking for one thing, which is transparency from the developers of the token.
TUSD Encompassed With Many Red Flags
Analysis from critics shows that the TUSD stablecoin has many red flags and shouldn't be placed among the top stablecoins available. Furthermore, numerous investors are being cautioned against investing in the token. Adam Cochran, a partner at Cinneamhain Ventures, is one of the prominent critics of the TUSD token, as he has pointed out several red flags which should keep traders away from this token.
TUSD could also just clearly outline their banking partners in public and we can get verifications from them on holdings - but I have a hunch that won't happen...— Adam Cochran (adamscochran.eth) (@adamscochran) June 28, 2023
In a research said to be made by this TUSD critic, the auditor certifying the USD audits at Prime Trust is the old FTX auditor. It was this same auditor that set up an auditing shop with a new name after the FTX collapse.
Cochran says that if TUSD is operating and working with a scandalous auditor like the old FTX auditor, the stablecoin and its executives should not be trusted. "These guys literally audited the biggest grift in history and just renamed themselves," Cochran said while explaining himself.
The Red Flags Keep Coming
Having the old auditors of FTX isn't the only issue critics have with TUSD. In fact, the major bone of contention is the lack of transparency about the management of the stablecoin.
Recently, the official emitters of the stablecoin contradicted themselves after saying that custodian Prime Trust isn't the only partner to mine and redeem TrueUSD.
However, within the same week after they made this statement, they came out to announce that mint and redeem were paused because of Prime Trust. Since making this announcement on June 23rd, they have not released any other update for more than 5 days.
Cochran is highlighting a significant problem regarding the inability to redeem the stablecoin.
"Multiple people have tried to redeem and instead got their tokens returned on chain. A few that did manage to redeem claim to have been sent USDT instead of getting USD back," he said.