Emerging Prime Trust ties have traders fretting over TUSD

Concerns around reminting on-chain for stablecoin TUSD continue to rise

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Praveen Nanu/Shutterstock modified by Blockworks

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With short interest mounting, traders say they’re parsing liquidity, as well as pricing, on the stablecoin True USD. 

The issuers of True USD (TUSD) had previously claimed that it had “no exposure” to digital asset on- and off- ramp company Prime Trust that had been recently shut down by Nevada regulators.

But most recent attestation reports as reviewed by Blockworks, said that it has a $26,000 exposure to the company — which regulators have moved to place under receivership. That exposure, though, is a pittance of TUSD’s $3 billion circulating supply. 

Minting and redemption mechanisms around TUSD tokens have become muddled, with some users saying they’ve had trouble on both fronts. 

Carlos Gonzalez, a research analyst at 21.co, told Blockworks on Thursday that it “didn’t make a lot of sense” for TUSD’s apparent liquidity issues to be attributed to its $26,000 of Prime Trust exposure alone. 

“It’s insignificant,” Gonzalez said. “It’s basically nothing [compared to its $3 billion circulating supply]. If it had just been $26,000, it didn’t make a lot of sense for the stablecoin to pause minting and redemptions — but apparently Prime Trust was the clearing bank [of TUSD], and that’s why that happened.”  

Users recently attempting to mint their TUSD were getting the stablecoin re-minted into their wallets. TUSD had previously relied on Prime Trust to maintain its on- and off-ramp services between crypto and fiat for its users, Protos originally reported

A Thursday independent audit of TUSD’s internal documented figures, including its holdings and associated reserves, said that the $26,000 of assets “were held at a U.S. depository institution which has communicated to customers that the institution has been ordered by state regulators to halt deposits and withdrawals for at and digital asset accounts.”

Those findings, which industry participants have said refer to Prime Trust, “impede our ability to obtain [sufficient] and appropriate evidence” regarding TUSD’s issuer’s “assertions that cash balances held in collateral at the aforementioned US-depository institution are readily convertible to know amounts of cash,” the report said. 

It wasn’t immediately clear whether additional cash or TUSD assets reside with Prime Trust. Representatives for Prime Trust and TUSD did not return requests for comment or declined to comment.

TUSD depegging

The price of TUSD has fallen off as a result, depegging from the US dollar, currently trading at $0.99, according to Blockworks data. It had depegged more significantly prior to Thursday, paring its losses toward the end of the week. 

Concerns around The Network Firm’s attestations of TUSD have also surfaced. 

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But Nic Carter, a general partner at Castle Island Ventures, said that two firms are not the same.

“The Network Firm is not a relaunch of Armanino, it’s a new firm entirely dedicated to crypto audits, stablecoin attests etc,” Carter tweeted. “Armanino shuttered their crypto biz because they got a lot of heat post FTX.”

In the meantime, centralized exchange Kraken has revealed that it will now support the deposits and withdrawals of TUSD on Justin Sun’s Tron Network, giving users the ability to withdraw the token if they wish to do so. 

Interest in stablecoin-based lending, meanwhile, has remained relatively robust, Gonzalez said. That’s been demonstrated, in at least one metric, by liquidity on DeFi-based lending solutions that support TUSD and additional stablecoins. 

TUSD is the fifth-largest stablecoin by market capitalization, trailing DAI, and it has traded $138 million in terms of volume over the last 24 hours, according to Blockworks Research. 

There’s no shortage of short interest against TUSD, according to Gonzalez, which has had “some impact on price.” But borrowing on the stablecoin has picked up significantly, with TUSD allocations in Curve3pool jumping to about 70% through Wednesday, notching a gain from its 27% standing as of June 20.

“People aren’t able to actually redeem right now,” he said. “It’s just getting minted back on-chain, and so that’s obviously a bad sign. We should wait and see if it’s just because of Prime Trust, and if they’re able to stave off this process.”


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