First Digital Trust, the company that created the first digital currency, caused its value to be pegged against the US dollar at a certain point. His statements, which originated on social media, resulted in a roughly 5% drop in FDUSD, which then partially regained it.
Investors should withdraw their assets from First Digital Trust. He added that the flaws in Hong Kong’s trust licensing process and financial risk management have left users at risk. He also asked regulators to step in to avoid destabilizing the market.
First Digital Trust, for its part, dismissed Sun’s claims as unfounded and asserted that US Treasury bills fully support FDUSD. The firm called Sun’s allegations an effort to weaken rival firms and a smear campaign. First Digital stressed that their reserves remain verifiable in publicly available attestation reports, assuring users all funds are now safe.
Consequences from the controversy have hit Binance particularly hard, as it has $2.2 billion worth of FDUSD customer deposits. As FDUSD is one of Binance’s most traded pairs, its issues may affect Binance and the larger crypto market.
Techteryx, the payer of TUSD, was involved in a separate dispute earlier than this one. Court filings revealed that the issuer of the TrueUSD (TUSD) stablecoin faced a $456 million shortfall due to illiquid investments. Sun previously provided support for TrueUSD, but fears about the management of stablecoin reserves and issuer transparency have since emerged.
With regulators and investors watching the events closely, experts say the incident has rekindled the need for an on-demand, verifiable proof-of-reserves mechanism to ensure stablecoin solvency.
