- Hong Kong-based First Digital’s stablecoin FDUSD has significantly deviated from its $1 peg, dropping as low as $0.87 against USDT.
- The price instability follows allegations from Tron founder Justin Sun claiming First Digital Trust is “effectively insolvent,” which the company firmly denies.
- First Digital maintains its reserves are fully backed by U.S. Treasury bills and calls Sun’s statements a “smear campaign” against a competitor.
First Digital’s stablecoin FDUSD has fallen below its intended $1 peg amid growing investor concerns about its reserves. The Hong Kong-based stablecoin issuer insisted on Wednesday that it remains “completely solvent” despite the price fluctuations. FDUSD dropped to 0.87 against Tether‘s USDT and 0.76 against Circle’s USDC on Binance, where the token is primarily traded.
The stablecoin later stabilized around $0.96-$0.98, still trading below its expected price peg. Notably, Bitcoin briefly approached a price of 100,000 FDUSD during the volatility. The price instability occurred shortly after CoinDesk reported issues with TrueUSD’s reserve assets being locked in illiquid investments.
Accusations and Denials
The situation intensified when Tron founder Justin Sun made serious allegations in a post on X, claiming “First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions.” Sun, who previously bailed out TrueUSD’s issuer company, urged users to “take immediate action to secure their assets.”
First Digital quickly refuted these allegations in their own post, stating that “every dollar backing FDUSD is completely secure, safe and accounted for with US backed T-Bills.” The company characterized Sun’s statements as “a typical Justin Sun smear campaign to try to attack a competitor to his business.”
Reserve Composition and Legal Action
Adding to the complexity, First Digital Trust, a trust company affiliated with First Digital, was previously appointed to manage TrueUSD reserves. First Digital has indicated it intends to “pursue legal action to protect its rights and reputation” in response to Sun’s allegations.
According to FDUSD’s latest monthly reserve report, the stablecoin’s $2 billion in reserves are primarily held in U.S. Treasury bills, with smaller portions in repo facilities and fixed deposits. This composition is meant to ensure the stablecoin maintains its dollar peg through liquid, secure backing.
First Digital suggested that rather than allowing the TUSD matter to be resolved in court, Sun has “resorted to a coordinated social media effort” to damage FDUSD as a business competitor, creating market uncertainty in the process.
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