The HUSD stablecoin, which touts to be a “secure, reliable, and fiat-collateralized stablecoin, that combines the stability of the US dollar and the efficiency of blockchain technology,” issued by Stable Universal, has fallen to $0.92, an 8% drop from its planned $1 peg, according to data from CoinMarketCap.
It is trading as low as $0.89 against the USDC stablecoin on decentralized finance (Defi) protocol Curve Finance. The de-pegging occurred 16 days after crypto exchange FTX removed HUSD from its basket of support USD stablecoins.
A stablecoin is a cryptocurrency designed to hold its value against another asset. This can be in the form of algorithmic stablecoins or reserve-backed coins, of which HUSD is an example. The stablecoin sector has been under intense regulatory scrutiny this year following the implosion of algorithmic stablecoin TerraUSD (UST), which saw $18.71 billion evaporate alongside the collapse of Terra’s LUNA token.
What you should know
HUSD is issued as an ERC-20 token on the Ethereum blockchain and is backed at a 1:1 ratio by US dollars held in US bank accounts. The HUSD token is held in reserve by the Paxos Trust Company.
Every month, a leading US auditing firm conducts tests to ensure that USD reserves are matched against HUSD supplies. In fact, a year ago, HUSD published a breakdown of reserves that showed every issued token was backed by U.S. dollars held in cash in money market accounts. Today, HUSD has a market cap of $149.5 million.
HUSD is issued by Stable Universal and can be redeemed on a 1:1 basis against the U.S. dollar, according to the company’s website.
FTX released a statement 16 days ago removing HUSD without a clear indication of why. They, however, stated, “Users will be able to deposit and withdraw HUSD if they wish; doing so will interact with distinct HUSD balances, not USD balances. HUSD deposits will not count towards USD balances and will not serve as collateral.”
Typically, when redemptions are live, the price will gravitate toward the peg because if it’s lower, traders can purchase tokens at a discount on an exchange and redeem them for a full dollar through the company’s website.
More information will be released as we know more.