TrueUSD (TUSD) Halts Minting Through Prime Trust Amid Depeg Concerns

TrueUSD (TUSD) has unexpectedly depegged from its $1 value following news that it will suspend minting services through Prime Trust, causing ripples across the crypto market.

TUSD Faces Depeg

On June 10, 2023, TrueUSD announced via Twitter that it would halt the issuance of TUSD through Prime Trust until further notice.

The company clarified that minting and redemption of TUSD are not affected and will continue as usual. Additionally, the partnership with banks remains intact, ensuring that transactions continue smoothly, reliably, and efficiently.

At the time of writing, around 3 PM, this announcement had caused TUSD to depeg to $0.9951 from its $1 USD peg.

1-hour Chart of TUSD/USDT on Binance as of 03:55 PM, June 10, 2023

Since the SEC’s lawsuit against Paxos over BUSD, Binance had adopted TUSD as its preferred stablecoin, promoting zero-fee Bitcoin trading pairs with TUSD. Despite this, concerns have arisen over TUSD's association with Justin Sun, a controversial figure in the crypto space.

TUSD’s market cap has surged to $2 billion, up significantly from $800 million at the beginning of 2023.

Reasons Behind TrueUSD's Decision

TrueUSD has not specified why it is suspending TUSD minting through Prime Trust, a company providing custody services for crypto firms.

However, the primary reason is likely linked to recent rumors about Prime Trust facing bankruptcy and a potential acquisition by BitGo on June 9, 2023, despite having raised over $100 million in June 2022.

Another theory is that the SEC’s recent lawsuits against Binance and Coinbase could be a factor. The SEC's lawsuit mentions "Trust Company B," which many speculate could be Prime Trust. The complaint describes:

"Trust Company B is a Nevada-based trust company. Around July 2019, BAM Trading [Binance.US] entered into an agreement with Trust Company B to facilitate USD cryptocurrency purchases on Binance.US for its customers."

According to Crunchbase, Prime Trust is also headquartered in Nevada.

Beyond Binance.US, Prime Trust previously worked with FTX before its collapse in November 2022. FTX had a sister fund, Alameda Research, which, although not directly affected by the lawsuit, is mentioned in the SEC's 136-page complaint as having had a “significant connection” with Binance.US in the past.

Prime Trust has been offering services to crypto firms since 2018 and served nearly 700 clients in fintech and crypto last year.

Historically, stablecoins like TUSD have played a crucial role in facilitating crypto transactions due to their stability tied to traditional fiat currencies. However, this recent depeg has prompted investors to question the stability of stablecoins and their critical role within the broader crypto ecosystem.