Notes 4/4: TUSD Attestation Reports

Stablecoin TrueUSD (TUSD) claims that it generates a real time attestation report for its reserves on its website. That’s an impressive achievement.

But TUSD is an unregulated stablecoin in the United States. That means the checks and balances that are standard for regulated entities here are absent for the stablecoin. The report, which is a confusing mash of figures and incorrect contract addresses, is proof.

TUSD has become an important part of the crypto ecosystem after Binance, the world’s biggest cryptocurrency exchange by trading volume, anointed it as the only zero free trading pair on its platform. The stablecoin’s trading volume shot up and it is now the second most widely traded cryptocurrency against Bitcoin, after Tether’s USDT.

The attestation report’s falsehoods mean that TUSD’s imprint on bitcoin trading will have a harmful effect on the cryptocurrency’s price and its future.

The Basic Fraud

Let’s start with the basics.

TUSD doesn’t provide much detail about how it manages to achieve the feat of real time attestation. A page on the website of the firm responsible for the attestation claims that its real time reserves solution can integrate with any data source including internal company systems and legacy financial institution Application Programming Interfaces (APIs) – programmatic connectors for data retrieval between different applications and websites.

Like most crypto claims, that’s hokum. While the complete list of banks holding TUSD’s reserves is not known, at least one of them – Bermuda-based Capital Union Bank – does not have a public API. That means it is impossible for TUSD to access real time balances electronically at the institution.

The problems with the “real time” nature of its attestation run beyond mere verification of balances, however.

What is TUSD’s Circulating Supply?  

The report generated by TUSD makes up numbers and contains incorrect contract addresses. It claims that the total number of TUSD tokens issued and collateralized across four blockchains – Ethereum, Binance’s BNB chain, TRON, and Avalanche – was equal to roughly 2.06 billion at 1:46 pm this afternoon. That is also the number of TUSD tokens listed as circulating supply on Binance’s Coinmarketcap site.  

Adding up the smart contract address balances listed in the attestation yields a different total of roughly $1.29 billion worth of tokens. This figure does not include Binance-peg TUSD tokens, a derivative of the stablecoin, circulating on Binance’s BNB chain.

The report helpfully notes that these tokens are not collateralized and goes on to provide an incorrect smart contract address for them. Even if one were to add the 18 million Binance-Peg TUSD contracts at a different address, the total still comes out to $1.47 billion worth of tokens.

How to account for the TUSD’s remaining circulating supply?

Another page on its website provides a possible answer. TUSD is available across 12 blockchains, and not four as mentioned in the report. The mismatch in circulating supply numbers means the total amount of reserves meant to backstop its circulating supply is also incorrect.   

But The Network Firm (Yes, that’s the name that TUSD’s accountants chose for their firm) has washed its hands off the report by stating the following on its Terms of Use page.

Given the nature and risk of cryptocurrency, the Independent Accountant’s report can become inaccurate in an instant.

The Tron and Binance Connection

The attestation report also links to a contract address that holds TUSD tokens on the Tron network.

The troubled blockchain, whose founder has been accused of fraud by the Securities and Exchange Commission recently, is the biggest repository of TUSD tokens. Out of the total supply of 2.06 billion TUSD tokens mentioned above, roughly 1.3 billion is parked at Tron.

And since, all roads in cryptocurrencies lead to Binance, so does the one with TUSD. Binance is the biggest holder of TUSD tokens on TRON. Around $1.24 billion of TUSD tokens are stored in Binance’s wallets.

A popular misconception about stablecoins is that they act as a bridge and facilitate trading between fiat currencies and cryptocurrencies. Therefore, they should not be held in wallets and employed as much as possible, especially those that are unregulated, to trade between various crypto pairs.

TUSD disproves that notion since Binance’s stash of TUSD is stored in cold wallets, away from the prying eyes of traders. In simple words, this means that 62% of the token’s supply is not available for trading.

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