A recent development has seen a trader take a $4m short position on the stablecoin TrueUSD (TUSD), following the temporary halt of mints and redemptions by its issuer through its banking partner, Prime Trust. The trader in question employed the use of Aave’s V2 lending platform by depositing 7.5 million USDC as collateral, borrowing 4 million TUSD, and promptly selling it for USDC. This opportunism stems from the issuer of the stablecoin announcing earlier this month that it would suspend new TUSD minting through its custodial partner, Prime Trust, a Las Vegas-based trust company that received a cease-and-desist order from the Financial Institutions Division (FID) of the Nevada Department of Business and Industry.
In the aftermath of this situation, the TrueUSD issuer clarified that it would not impact its operations in terms of the conversion of fiat to stablecoin and vice versa. The issuer affirmed that it has no exposure to Prime Trust and maintains multiple USD rails for the minting and redemption of TrueUSD.
This comes after digital asset custodian BitGo signed a non-binding letter of intent to acquire the fintech infrastructure provider Prime Trust, only to cancel the acquisition later on. Following regulatory issues with the associated BUSD stablecoin, the adoption of TUSD by cryptocurrency exchange Binance led to an increase in its usage. This surge in popularity propelled TUSD to become the fifth largest stablecoin, with a market capitalization of just over $3.1 billion according to CoinGecko.
While the temporary halt of mints and redemptions of TUSD by its issuer has created an attractive trading opportunity, the bigger picture raises questions about the stability and operations of stablecoins and their issuers. Cryptocurrency enthusiasts and traders must remain vigilant, as regulatory scrutiny and operational challenges may impact the value and stability of digital assets such as TrueUSD.
Source: Cointelegraph
