Trader takes $4M short position on TrueUSD as issuer halts mints and redemptions

An Ethereum user used Aave’s v2 lending platform by depositing 7.5 million USDC as collateral.

Following the issuer’s decision to temporarily halt mints and redemptions through its banking partner, Prime Trust, a trader has taken advantage of the situation by initiating an on-chain short position on the stablecoin TrueUSD (TUSD).

According to on-chain data, an Ethereum user utilized Aave’s V2 lending platform by depositing 7.5 million USDC, a stablecoin, as collateral. They then borrowed 4 million TUSD, another stablecoin, and promptly sold it for USDC. This strategy of borrowing and immediately selling is frequently employed to establish a short position on a particular asset.

Earlier this month, the issuer of the stablecoin made an announcement regarding the suspension of new TUSD minting through its custodial partner, Prime Trust, a trust company based in Las Vegas. Subsequently, the Financial Institutions Division (FID) of the Nevada Department of Business and Industry issued a cease-and-desist order against Prime Trust.

In response to the Prime Trust situation, the TrueUSD issuer clarified that it does not affect its operations concerning the conversion of fiat to stablecoin and vice versa. Through a statement, the issuer affirmed that they have no exposure to Prime Trust and maintain multiple USD rails for the minting and redemption of TrueUSD, as stated in a tweet.

The wallet infrastructure provider and digital asset custodian BitGo previously signed a non-binding letter of intent to acquire the fintech infrastructure provider Prime Trust, according to an announcement on June 8. However, On June 22, BitGo announced on Twitter that it had decided to cancel its acquisition of fintech infrastructure provider Prime Trust.

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Following regulatory issues with its associated BUSD stablecoin, the adoption of TrueUSD (TUSD) by cryptocurrency exchange, Binance, led to a significant increase in its usage. The TUSD stablecoin experienced a surge in popularity as a result.

TUSD is the fifth largest stablecoin after Tether USD (USDT), USD Coin (USDC), DAI, and BUSD, with a market capitalization of just over $3.1 billion, according to CoinGecko.

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