New Stablecoin Bill Faces Criticism for Stifling Innovation and Breaching First Amendment

April 20, 2024 Bitcoin.com

Binance mints 50M TrueUSD days after Paxos ordered stop issuing BUSD

February 17, 2023 Coin Telegraph

Despite the minting of $50 million in TUSD, Zhao previously said the regulatory crackdown on stablecoins in the U.S. will cause the USD-back stablecoin market to “shrink.”

Only days after reports of United States regulatory scrutiny of Paxos and Binance USD (BUSD), cryptocurrency exchange Binance has minted nearly $50 million worth of TrueUSD (TUSD).

The transaction took place on Feb. 16, according to data from Etherscan, and also comes two days after Binance CEO Chanpeng 'CZ' Zhao said in a Feb. 14 Twitter Spaces that Binance would look to “diversify” its stablecoin holdings away from BUSD.

We're live!

Tune-in to our Twitter Space AMA with @cz_binance below https://t.co/bXIztCKdry
— Binance (@binance) February 14, 2023

Despite minting nearly $50 million in TUSD from the TrustToken platform’s smart contract on Feb. 16, CZ had earlier said the recent regulatory action by the United States Securities Exchange Commission (SEC) and the New York Department of Financial Services (NYDFS) over the long term may lead to a fall in the dominance of U.S. dollar-backed stablecoins.

“I think with the current stances taken by the regulators on the U.S. Dollar-based stablecoin, the industry will probably move away to a non-U.S. Dollar-based stablecoin, back to algorithmic stablecoins.”

“There’s multiple agencies putting applied pressure there. It is just going to shrink the U.S. Dollar-based stablecoin market,” he added.

CZ said that “this has prompted us to look for more options in different places” and that they’re now exploring other options.

50M #TUSD minted at #Binance and the price of $TRU increased by 200%.

On-chain data shows that #Alameda and #justinsun are the two largest minters of $TUSD.#Alameda minted a total of 1.64B $TUSD in history.#justinsun minted a total of 889M $TUSD in history. pic.twitter.com/N1tUjFQm5U
— Lookonchain (@lookonchain) February 16, 2023

While the CEO stated that Binance would provide more support for USD Coin (USDC) and Tether (USDT) over the short term — in expectation that BUSD “winds down over time” — he added that they’re now looking to explore more into Euro and Japanese Yen-based stablecoins.

As for BUSD, CZ said “the existing circulating supply of BUSD is there and safe, and as more people want to redeem, they will be burned.”

Interestingly, the Binance CEO added that he was never too bullish on the success of the Binance-branded BUSD stablecoin anyway:

“To be honest BUSD was never a big business for us, when we started I actually thought the BUSD project may fail, so we actually don’t have very good economics on that collaboration.”

Interesting, in September, TUSD was one of the stablecoins that Binance auto-converted to BUSD to enhance liquidity and capital-efficiency for its users. Other stablecoins that got auto-converted were USDC and USDP Stablecoin (USDP). This drove up BUSD’s share in the stablecoin market from 10% to 15% in a matter of weeks.

TrustToken launched TUSD on Mar. 5, 2018, which operates on the Ethereum, Avalanche, MATIC and Tron networks.

New TUSD is minted whenever a buyer wires USD to a third-party escrow that holds USD deposits on Prime Trust's behalf. Once received, TUSD will be transferred in a 1:1 ratio to the USD sent to the trader’s nominated ERC-20 or BEP-2 wallet address.

Ethereum Rival Plummets in Price After Stablecoin Built on Its Chain Loses Peg to US Dollar

December 16, 2022 The Daily Hodl

US Prosecutors Probing Whether Former FTX CEO Sam Bankman-Fried Influenced the Terra (LUNA) Implosion: Report

December 9, 2022 The Daily Hodl

Draft US stablecoin bill would ban new algo stablecoins for 2 years

September 21, 2022 Coin Telegraph

algorithmic Stablecoins

It’s reported the bills' definition will cover “endogenously collateralized stablecoins,” which depend on the value of an attached cryptocurrency from the same creator for it to maintain a stable price.

Draft legislation in the United States House of Representatives would place a two-year ban on new algorithmic stablecoins such as TerraClassicUSD (USTC) which de-pegged from the US dollar earlier this year causing widespread crypto market contagion.

The bill would criminalize the creation or issuance of new “endogenously collateralized stablecoins,” according to a current draft of the legislation obtained by Bloomberg.

However the legislation includes a grace period of two-years for existing algorithmic stablecoin providers to change their models and collateralize their offering differently.

The definition would reportedly cover stablecoins which depend on the value of another virtual asset from the same creator to maintain its price and is marketed as having the ability to be converted, repurchased or otherwise redeemed for a fixed price.

The bill raises concerns over whether stablecoins such as Synthetix USD (SUSD) would be captured by the definition, as it is currently collateralized with the native asset of the same protocol in the SNX token. Other algo-stablecoins with a similar structure include BitUSD which is backed by BitShares (BTS).

Those well-educated on crypto understand that Terra doesn't represent all stablecoins, Celsius wasn't DeFi, 3AC had nothing to do with the technology, etc.

But as in all things, it's a lot harder to engage with those nuances than to simply say "crypto bad, regulate it to death."
— Jake Chervinsky (@jchervinsky) September 19, 2022

The draft bill also mandates the U.S. Treasury to undertake a study on algorithmic stablecoins and consult with the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

It’s possible the panel could vote on the bill as early as next week, Bloomberg reports people familiar with the legislation state Democratic Representative Maxine Waters and Republican Patrick McHenry have been working to reach an agreement on the legislation, although it's unknown if McHenry approved the latest draft.

Waters Chairs the House Financial Services Committee, of which McHenry is a Ranking Member, both heard testimony at a hearing Tuesday that U.S. dollar-backed stablecoins could enhance national security due to the perceived prestige and reliability of the dollar.

TerraClassicUSD (USTC), formerly known as TerraUSD (UST) is an algorithmic stablecoin which lost its 1:1 peg with the U.S. dollar in early May hitting an all-time low of $0.006 in mid-June which resulted in tens of billions of dollars worth of losses.

Solana-based stablecoin NIRV drops 85% following $3.5M exploit

July 29, 2022 Coin Telegraph

Solana-based stablecoin NIRV drops 85% following .5M exploit

algorithmic Stablecoins

The $3.5 million flash loan attack Solana-based Nirvana Finance saw the price of its stablecoin NIRV and native token ANA fall around 85% apiece.

Solana-based algorithmic stablecoin NIRV has become the latest stablecoin to fail, after dropping 85% from its dollar peg following a hack on adaptive yield protocol Nirvana Finance on Wednesday.

The flash loan attack, which also saw Nirvana Finance’s native token ANA drop by 85%, resulted in the loss of $3.49 million worth of Tether (USDT), with the SolanaFM team being the first to confirm that the funds were siphoned via a flash loan attack on July 27:

“Utilizing Solend Protocol’s Flash Loans, the hacker borrowed $10M USDC from the Solend Main Pool Vault which was used to exploit $3.49M USDT from the Nirvana Finance Treasury.”

At the time of writing, both NIRV and ANA are down roughly 85% to $0.14 and $1.33 apiece. On Nirvana’s website, it confirms that the protocol was “maliciously hacked and reserve funds are stolen. NIRV and ANA have lost their collateral, and do not have secured market value.”

What we know so far:

Nirvana has been maliciously hacked and the reserves have been stolen.

A flashloan attack was used to steal money. This is not the fault of Solend, but an exploit of Nirvana's program.https://t.co/NkmtHAbAAa
— Nirvana Finance (@nirvana_fi) July 28, 2022

The Nirvana team is now offering the hacker a whitehat bounty of $300,000 and a “cessation” of the investigation into their identity. So far they revealed that the hacker’s wallet tied to a centralized exchange has been flagged.

"Please accept this good faith request and return our treasury for the good of the whole Nirvana community. You have not taken money from VCs or large funds—the treasury you have taken represents the collective hopes of everyday people," it wrote.

To The Nirvana Hacker:

On behalf of the Nirvana Finance community, we humbly ask that you return the stolen funds from our treasury. 1/5
— Nirvana Finance (@nirvana_fi) July 28, 2022

Another algo bites the dust

The algorithmically collateralized NIRV is unironically described by the protocol as a “superstable” token. According to an explanatory thread on Solana Forums, the asset is backed by a network of stablecoins in Nirvana’s reserves via a “decentralized peg delegation.”

“NIRV is always treated as $1 from the protocol’s point-of-view. This dollar value is denominated in ANA tokens. For instance, if the spot price of ANA is $12, the protocol accepts 12 NIRV to purchase an ANA token.”

In this instance, it appears that NIRV was depegged as a direct result of $3.49 million worth of USDT being stolen from Nirvana’s coffers. It marks yet another algo-stablecoin that has been severely depegged in 2022. Beanstalk Farm’s algorithmic stablecoin is sitting at $0.0022 after the protocol was hacked for $182 million in April.

Terra’s first variation of its algo-stablecoin Terra USD also famously imploded following a death spiral that resulted in $40 billion being wiped from the market in May.

How it worked

According to blockchain audit platform OtterSec, a hacker used a program to artificially pump the price of ANA from $8 to $24 via the flash loan. They were then able to mint ANA against the flash loan at the inflated price, and subsequently exchanged the asset for $3.49 million worth of USDT which was drained directly from Nirvana’s treasury.

OtterSec noted that his hack shared similarities with the attack on Crema Finance worth $10 million earlier this month, in which the attacker took out a flash loan from the Solend decentralized finance (DeFi) protocol to inflate pricing data and raid the protocol.

2/ This hack beared many similarities to previous hacks. Similar to the @Crema_Finance hack, this too used Solend flashloans.

The attacker’s program was also uploaded on-chain and closed immediately afterwards. https://t.co/kgg7C2M2Gq pic.twitter.com/GJaAZlfJZD
— OtterSec (@osec_io) July 28, 2022

SolanaFM also noted that the hacker exited the attack by converting “the full USDT amount into USDCet, transferring the funds into an ETH account” via Wormhole’s cross-chain bridge.

algorithmic Stablecoins