Huobi Global Provides Post-Mortem on HUSD Depeg
- Huobi Global has now resumed HUSD trading; the stablecoin had lost its peg for 12 hours.
- Stable Universal indicated it had shut down the accounts of several market makers in specific regions to comply with legal requirements, causing a short-term liquidity crisis.
- The team did not indicate whether the “legal requirements” were related to the sanctions against Tornado Cash.
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Huobi Global and Stable Universal have released statements explaining the reasons behind HUSD’s 12-hour depeg.
Huobi Global has provided a short post-mortem on the HUSD stablecoin depeg.
The leading crypto exchange indicated on Twitter that HUSD had been made available for trading again shortly after regaining its peg on August 18 at around 22:00 UTC. The depeg incident lasted 12 hours.
Stablecoins are cryptocurrencies designed to stay at parity with government-issued currencies such as the U.S. dollar or the euro. HUSD isn’t issued by Huobi Global but by Stable Universal; however, the exchange’s investment arm, Huobi Capital, invested heavily in the company in 2019.
Data from CoinGecko show that, after breaking parity, HUSD traded for as low as $0.87 for a short period of time. Stable Universal claims HUSD can be redeemed on a one-to-one basis for dollars.
The official Twitter page for HUSD furthermore explained that the depeg had been caused by a “decision to close several accounts in specific regions to comply with legal requirements, which included some market maker accounts,” which, according to the team, resulted in a short-term liquidity crisis.
Stablecoin depegs have become recurrent events in the crypto space following the broader market’s downturn this year. In May, Terra’s algorithmic stablecoin UST lost its peg and collapsed, directly wiping out over $43 billion from the ecosystem. While Terra’s collapse had the most devastating effect on the crypto market, it is far from the only stablecoin to lose its peg this year. In June, for example, TRON’s USDD stablecoin similarly depegged, although it slowly recovered parity to the dollar over the following weeks. Among other stablecoin depegs have been Acala’s aUSD, Deus Finance’s DEI, and Waves’ Neutrino USD.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.