- First Digital has processed nearly $26 million in FDUSD stablecoin redemptions following a brief depeg caused by Justin Sun‘s insolvency allegations.
- Despite Sun’s claims about unauthorized fund transfers, blockchain data confirms First Digital has honored redemption requests, maintaining the stablecoin is fully backed.
- Industry experts warn that stablecoin depegs pose greater systemic risks to the crypto ecosystem than Bitcoin Price crashes.
First Digital has redeemed almost $26 million in stablecoin withdrawals after its FDUSD token temporarily lost its US dollar peg. The depeg, which saw the token fall to $0.87 on April 2, followed accusations from Tron founder Justin Sun claiming the company was insolvent.
Sun escalated his allegations on April 4, claiming that First Digital transferred over $450 million of customer funds to a Dubai-based entity without authorization and violated Hong Kong securities regulations. "FDT transferred $456 million of its custodial clients to a private company in Dubai without their authorization and has not yet returned the money," Sun stated.
Despite these accusations, blockchain data from Etherscan shows First Digital has honored approximately $25.8 million in FDUSD redemptions since the incident. "We continue to process redemptions smoothly, demonstrating the fortitude of $FDUSD," the company noted on April 3.
When users redeem FDUSD for US dollars, the corresponding tokens are burned onchain, maintaining the 1-to-1 peg with the dollar and ensuring circulating supply matches reserves. Following Sun’s accusations, First Digital reassured users that FDUSD remains fully backed and redeemable, describing Sun’s claims as "baseless accusations."
Stablecoin Depegs Present Significant Market Risks
According to Gracy Chen, CEO of Bitget, stablecoin depegs pose "a greater systemic risk" to crypto than Bitcoin price crashes. Chen explained that stablecoins are fundamental to market liquidity, DeFi operations, and user trust.
"Current transparency, collateral quality and accountability among leading stablecoin issuers are insufficient," Chen told Cointelegraph, adding that depegs can trigger "cascading failures like the TerraUSD collapse in 2022."
The Terra ecosystem collapse in May 2022 serves as a cautionary example, where the $40 billion ecosystem imploded within days as its algorithmic stablecoin TerraUSD lost its dollar peg, crashing to around $0.30. The value of its sister token Luna plummeted over 98%, destroying significant market value.
Chen suggests implementing real-time audits, prioritizing high-quality collateral, strengthening regulatory oversight, and diversifying stablecoin usage to mitigate future risks in the stablecoin market.
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