The rapidly evolving world of crypto and DeFi can be overwhelming, making it challenging to keep up with the latest developments and significant milestones surrounding popular stablecoins. Here's a curated recap of the pivotal moments in centralized fully reserved stable coins from 2022 to 2023.
- May 2022: Stablecoins post LUNA/UST collapse
- September 2022: Binance delist USDC
- Feb 2023: NYDFS terminates Paxos BUSD
- March 2023: USDC entangled in US Banking crisis
- June 2023: Binance launches TUSD and FDUSD
- July 2023: Multichain bridge hack
- August 2023: Tether and Binance: A Public Spat
- September 2023: The TUSD info leak
- October 2023: BTC “god candle” and FDUSD
Stablecoins Post LUNA/UST Collapse
Post LUNA/UST collapse in May 2022, centralized fully reserved stable coins experienced a resurgence, with the big 3, USDT (Tether_to), USDC (Circle) and BUSD (Binance & Paxos) leading the charge in both marketcap and trading volume. The market perceived USDC to be the more regulated and safer option thus its share of marketcap and trading volume climbed fastest among the three. It reached a peak of 55B in July 2022, only 10B away form the oldest and #1 stable coin, USDT.
https://preview.redd.it/lexnahwlpnwb1.png?width=1788&format=png&auto=webp&s=bc36bed40c2c549e2d3f7e2737d78af478bc7c06
https://coinmarketcap.com/historical/20220707/
Binance delist USDC
The first shot of the 2022-2023 stablecoin war was fired by Binance when they delisted USDC pair on September 29th, 2022 while at the same time incentivizing BUSD with 0% fees on major trading pairs.
https://preview.redd.it/xjumn3lnpnwb1.jpg?width=1253&format=pjpg&auto=webp&s=72adb86dd3cd77cc182a77d24008793bd4021c84
#Binance to Auto-Convert $USDC, $USDP, $TUSD to #BUSD (Binance USD).
— Binance (@binance) September 5, 2022
Not delist. You can still deposit and withdraw USDC. Just merging all liquidity into one pair. Best price, lowest slippage for users.
— CZ 🔶 Binance (@cz_binance) September 5, 2022
This led to a significant decline of USDC marketcap from 55B to 42B
NYDFS terminates Paxos BUSD
USDC issuer, Circle, fought back and filed a complaint to the NYDFS bolstered by an investigation from chain analytics firm, ChainArgos.
BUSD on BSC was often undercollateralized/unbacked
a dig into the Binance-Peg process and some associated, um, issues
chart-filled thread
— Data Finnovation (@DataFinnovation) January 2, 2023
This probe unearthed discrepancies: while BUSD on Ethereum was fully backed, its counterpart on the BSC blockchain often fell short of 100% backing. The revelation led the NYDFS to issue a stern directive to Paxos in February 2023: halt the minting of BUSD.
https://preview.redd.it/0a0zxz0ppnwb1.jpg?width=900&format=pjpg&auto=webp&s=d8cd9d925592501f63fe875d3106a963bb244f5a
"DFS has ordered Paxos to cease minting Paxos-issued BUSD as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD.
— Cointelegraph (@Cointelegraph) February 14, 2023
The consequences were swift: a slump in Binance CEX trading volume and a liquidity drought in BSC DeFi, especially as the most liquid pools on Pancakeswap, BSC's top DEX, were denominated in BUSD. Paxos issued a statement that it is sunsetting BUSD but will still process BUSD redemption until February 2024.
USDC entangled in US Banking crisis
A subsequent resurgence of USDC was abruptly halted only a month later in March 2023, due to the US Banking Crisis
https://en.wikipedia.org/wiki/2023_United_States_banking_crisis
in which Silicon Valley Bank (SVB), where a significant portion of USDC reserves were held, became insolvent.
The remaining 23% ($9.7bn) is in cash. Last week, we took action to reduce bank risk and deposited $5.4bn with BNY Mellon, one of the largest and most stable financial institutions in the world, known for the strength of their balance sheet and as a custodian.
$3.3bn of USDC’s…
— Jeremy Allaire (@jerallaire) March 11, 2023
As market participant realized the situation direness, USDC begun to depeg reaching a low of 0.88
Several DeFI protocols that hardcoded USDC price to 1 were promptly exploited resulting in millions of dollars in losses. USDC rebounded the next day from the announcement that the FDICgov will make all SVB depositors whole and the Federal Reserve will buy treasury holdings of troubled banks at par value, a departure from previous public policy.
This morning, we acted to protect all depositors of the former #SiliconValleyBank of Santa Clara, California. This action will help preserve franchise value for marketing and sale of the closed institution without cost to the taxpayer. https://t.co/y8toHHw8rh pic.twitter.com/uvpLMuONyq
— FDIC (@FDICgov) March 13, 2023
Update thread on USDC
We were heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system.
100% of deposits from SVB are secure and will be available at banking open tomorrow.
— Jeremy Allaire (@jerallaire) March 12, 2023
Though USDC survived, the damage to its reputation remained and it’s marketcap continue to dwindle from this point on with most of it migrating to USDT / Tether. With BUSD on end-of-life cycle and USDC reputation tarnished, USDT / Tether regained dominance in trading volume on most overseas exchange including Binance and also on-chain in many DeFI protocols.
Binance's Attempt with TUSD and FDUSD
Binance tried again with a new stable coin TUSD (TrueUSD), seemingly in partnership with Justin Sun
🧵1/Ω
pretty weird that the same address deployed all these tokens on #Tron:(and this despite the fact that Justin Sun has threatened to sue people who say he owns #Archblock / #TrueUSD)https://t.co/IMGvmSVp7f pic.twitter.com/hNlxrlv5qx
— ⚯ M Cryptadamus ⚯ | @cryptadamist@universeodon.com (@Cryptadamist) October 22, 2023
They promoted TUSD pair with 0% maker and taker fee and also seeded liquidity on BSC Pancakeswap DEX with liquidity pool farms for the TUSD -USDT pair
Stablecoin trading fee updates on Binance:
🔸Zero maker fees on TUSD spot & margin trading pairs
🔸All [USD stablecoin/USD stablecoin] pairs now have zero maker & taker fees (e.g. TUSD/BUSD, USDC/USDT)
🔸BUSD zero maker fee promotion extended until EOYhttps://t.co/oAUdCcQE8e
— Binance (@binance) June 21, 2023
In June, in addition to its TUSD offering, Binance also launched FDUSD (FirstDigital) with similar marketing as TUSD
First Digital, a Hong Kong licensed trust company, launches a new USD pegged stablecoin (FDUSD), on #BNB Smart Chain.
— CZ 🔶 Binance (@cz_binance) June 1, 2023
https://x.com/cz_binance/status/1699021639197819154?s=20
Multichain Bridge Hack
One month later in July 2023, MultichainOrg, a popular bridge in DeFI was seized by the Chinese police
1. On May 21, 2023, Multichain CEO Zhaojun was taken away by the Chinese police from his home and has been out of contact with the global Multichain team ever since. The team contacted the MPC node operators and learned that their operational access keys to MPC node servers had…
— Multichain (Previously Anyswap) (@MultichainOrg) July 14, 2023
and along with it almost the entire bridged USDC and USDT supply in FTM blockchain is gone
In response to the news, our team immediately started contacting stablecoin issuers, namely Circle (USDC), Tether (USDT), and TrueUSD (TUSD) to freeze the assets in Multichain wallets. We have verified that approximately >$60m USDC and >$2m USDT has been frozen.
2/7
— Fantom Foundation (@FantomFDN) July 15, 2023
This event highlighted the need of a trustless bridge for chains that has no native USDC or USDT support and made axelarcore bridge, a solution endorsed by uniswap and circle, rose in popularity.
https://x.com/axelarnetwork/status/1669382878101229568?t=t0I_PEET3VBpwdvd-Vswsg&s=35
https://www.circle.com/blog/composable-usdc-seamless-multichain-ux-by-axelar
Tether and Binance: A Public Spat
In August 2023, jibes were exchanged between Tether and Binance with each implying of the other’s impropriety. During a twitter AMA , Binance CEO’s Changpeng Zhao stated that USDT is a black box without any proper audit.
While Tether’s CTO, Paolo Ardoino accused Binance of intentionally de-pegging USDT
https://x.com/paoloardoino/status/1687203348561223680?s=20
The TUSD Info Leak
TUSD slowy started to gain trading volume until a scandal broke out in September in which a hacker leaked TUSD clients info
https://www.theblock.co/post/256661/trueusd-third-party-security-breach-revealed-blockchain-wallet-addresses-of-clients
In late October, an investigation by the same firm that exposed BUSD inconsistent backing, ChainArgos, revealed that TUSD deployer key was likely compromised and used to create TEURO
The $TEURO plot thickens:
Apparently TrueUSD (the stablecoin company behind things like $TUSD, $TGBP, etc) claims to "have zero affiliation" with $TEURO. However the $TEURO contract was inarguably deployed with one of TrueUSD's private keys.
Given that TrueUSD has admitted… https://t.co/0wNLBeVVCQ pic.twitter.com/KEUgEY6Hff
— ChainArgos (@ChainArgos) October 23, 2023
This revelation eroded confidence in TUSD and it became slightly off peg at -0.4% on October 24th
BTC's 'God Candle' and FDUSD's Sudden Spike
During the BTC “God Candle” pump of 23-24 October, FDUSD which has been relatively dormant until that time experienced a sudden volume spike that made its volume/marketcap climb to >700% and dominated BTC buying compared to USDT
https://preview.redd.it/jti6fjlrpnwb1.jpg?width=2310&format=pjpg&auto=webp&s=7ad107c2a45bda877fd747ef7bdfbf703daf3ded
Lets run it back with fdUSD shall we. I'm all ears if someone can explain why the BTC/fdUSD pair is all buying while the BTC/USDT pair is normal. https://t.co/zIh9ZrqKeR pic.twitter.com/cnURXFd4qA
— Fudzy (@fozzydiablo) October 23, 2023
And this wraps up our recap of stablecoins tumultuous journey over the past two years, you can bet 2024 will be even more dramatic!
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Some stablecoins wont stay stable all the time, I ammost sceptical about FDUSD
What about Dai?