On April 3, 2025, the cryptocurrency market once again made waves with a stablecoin. This time, the protagonist is FDUSD (First Digital USD), a dollar-pegged stablecoin issued by Hong Kong-based trust company First Digital Trust (FDT). An explosive accusation by Tron founder Justin Sun propelled FDUSD to the forefront, causing its price to drop to $0.87 at one point, causing panic in the market.
Is this a deliberate smear campaign or an exposure of deep-seated issues in the stablecoin industry? Let's sort out this crisis from the beginning and take the opportunity to understand how stablecoins operate.
What is a stablecoin?
Before delving into the events, let's talk about what stablecoins are. Stablecoins are a type of cryptocurrency designed to maintain price stability, usually pegged 1:1 to fiat currencies like the US dollar. They serve as a "bridge" in the blockchain world, allowing users to hold "stable" assets in a volatile cryptocurrency market for trading, payments, or hedging.
The stability of stablecoins is usually achieved through the following methods:
Asset-backed: The issuer holds an equivalent amount of legal currency or assets (such as US dollars, government bonds) as reserves, allowing users to exchange at any time. For example, USDT (Tether) and USDC (Circle) are representatives of this category.
Algorithmic: Stabilizes the price by adjusting the supply through smart contracts, such as the early TerraUSD (UST); however, this type of stablecoin carries higher risks, as the collapse of UST in 2022 serves as a lesson.
Hybrid: A combination of asset-backed and algorithmic adjustment, relatively rare.
FDUSD falls into the first category and is backed 1:1 by FDT's commitment to U.S. dollars or its equivalent in assets such as U.S. Treasuries. However, the "stability" of stablecoins is not innate, but is built on the credibility and reserve transparency of the issuer. Once trust is shaken, depeg can happen – and that's exactly what FDUSD is experiencing.
Event Background: The Controversy from TUSD to FDUSD
FDUSD was launched in June 2023, backed by Hong Kong's FDT, quickly rising to the top four in the stablecoin market with a market capitalization of approximately $3.3 billion. However, FDT is not without controversy, as it also manages another stablecoin, TUSD (TrueUSD), which has faced numerous troubles in recent years.
From 2023 to early 2024, TUSD frequently made headlines due to reserve management issues. Court documents from Hong Kong show that TUSD's issuer, Techteryx, faced a funding gap of $456 million because FDT invested reserves in high-risk assets, leading to an inability to redeem in a timely manner. Tron founder Justin Sun once rescued TUSD through emergency loans, but the relationship with FDT deteriorated afterward. This enmity laid the groundwork for today's FDUSD crisis.
From Allegations to Market Turmoil
On April 2, 2025, Justin Sun dropped a bombshell on platform X: "First Digital Trust is insolvent and unable to fulfill its customer redemption obligations." He claimed that FDT is involved in fraud amounting to as much as $500 million, that trust regulation in Hong Kong is virtually nonexistent, and called for users to withdraw their funds and for regulatory intervention. Sun also announced a press conference on April 3 to disclose more evidence.
This accusation directly targets the Achilles' heel of FDUSD - if FDT really goes bankrupt, is the dollar reserve of FDUSD safe? The market swiftly fell into panic.
FDUSD decoupling and sell-off
After the news was released, the price of FDUSD quickly decoupled. On April 2nd, it fell to a minimum of $0.87 (relative to USDT), and even briefly touched $0.76 (relative to USDC), with a drop of up to 12%-24%. The 24-hour trading volume surged to $5.9 billion, as a large number of users sold off FDUSD to avoid risks.
FDT's counterattack
In the face of the crisis, FDT quickly issued a statement on the evening of April 2: "The accusations by Justin Sun are purely rumors and have nothing to do with FDUSD, only involving TUSD. We are fully solvent, and the 2.04 billion circulating supply of FDUSD is backed by 2 billion US Treasury bonds and other assets." They accused Sun of spreading FUD (fear, uncertainty, and doubt) and announced that they would take legal action, while also planning to hold an AMA on April 3 at 16:00 (Hong Kong time) in X Spaces to clarify publicly.
Why Are Stablecoins Prone to "Instability"?
The decoupling of FDUSD is not an isolated case. In 2022, TerraUSD went to zero due to algorithm failure, and in 2023, USDC briefly dropped to $0.88 due to the Silicon Valley Bank crisis. Common reasons for the instability of stablecoins include:
Insufficient or opaque reserves: The issuer does not hold sufficient assets or invests in high-risk products.
Market Panic: A run leads to a wave of sell-offs, and even ample reserves may not be enough to respond in time.
Lack of Regulation: Many stablecoin issuers operate outside of traditional financial regulation, relying solely on self-disclosure for trust.
In the FDUSD incident, Sun's accusations directly struck at the foundation of trust, and whether FDT can prove its innocence will determine its fate.
Future Outlook for FDUSD
Short-term: The AMA of FDT and Sun's press conference will be key. If FDT can demonstrate transparent reserves, FDUSD may return to $1; if Sun presents conclusive evidence, it could trigger a larger crisis.
Long-term: Hong Kong's regulation may tighten stablecoin policies, and the competitive landscape of the industry may change depending on the success or failure of FDUSD. USDT, USDC, and even USDD may benefit from this.
The FDUSD crisis is yet another reflection of trust and risk in the stablecoin market. Technically speaking, stablecoins are the cornerstone of the blockchain economy; however, in reality, their stability relies on the interplay of human nature and regulation.
Author: Rooick Z., Gate.io researcher
*This article only represents the author's views and does not constitute any trading advice. Investment carries risks, and decisions should be made with caution.
*The content of this article is original and the copyright belongs to Gate.io. If reprinting is required, please indicate the author and source; otherwise, legal responsibility will be pursued.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
FDUSD Crisis: Another Trust Test for the Stablecoin Market
Introduction
On April 3, 2025, the cryptocurrency market once again made waves with a stablecoin. This time, the protagonist is FDUSD (First Digital USD), a dollar-pegged stablecoin issued by Hong Kong-based trust company First Digital Trust (FDT). An explosive accusation by Tron founder Justin Sun propelled FDUSD to the forefront, causing its price to drop to $0.87 at one point, causing panic in the market.
Is this a deliberate smear campaign or an exposure of deep-seated issues in the stablecoin industry? Let's sort out this crisis from the beginning and take the opportunity to understand how stablecoins operate.
What is a stablecoin?
Before delving into the events, let's talk about what stablecoins are. Stablecoins are a type of cryptocurrency designed to maintain price stability, usually pegged 1:1 to fiat currencies like the US dollar. They serve as a "bridge" in the blockchain world, allowing users to hold "stable" assets in a volatile cryptocurrency market for trading, payments, or hedging.
The stability of stablecoins is usually achieved through the following methods:
FDUSD falls into the first category and is backed 1:1 by FDT's commitment to U.S. dollars or its equivalent in assets such as U.S. Treasuries. However, the "stability" of stablecoins is not innate, but is built on the credibility and reserve transparency of the issuer. Once trust is shaken, depeg can happen – and that's exactly what FDUSD is experiencing.
Event Background: The Controversy from TUSD to FDUSD
FDUSD was launched in June 2023, backed by Hong Kong's FDT, quickly rising to the top four in the stablecoin market with a market capitalization of approximately $3.3 billion. However, FDT is not without controversy, as it also manages another stablecoin, TUSD (TrueUSD), which has faced numerous troubles in recent years.
From 2023 to early 2024, TUSD frequently made headlines due to reserve management issues. Court documents from Hong Kong show that TUSD's issuer, Techteryx, faced a funding gap of $456 million because FDT invested reserves in high-risk assets, leading to an inability to redeem in a timely manner. Tron founder Justin Sun once rescued TUSD through emergency loans, but the relationship with FDT deteriorated afterward. This enmity laid the groundwork for today's FDUSD crisis.
From Allegations to Market Turmoil
On April 2, 2025, Justin Sun dropped a bombshell on platform X: "First Digital Trust is insolvent and unable to fulfill its customer redemption obligations." He claimed that FDT is involved in fraud amounting to as much as $500 million, that trust regulation in Hong Kong is virtually nonexistent, and called for users to withdraw their funds and for regulatory intervention. Sun also announced a press conference on April 3 to disclose more evidence.
This accusation directly targets the Achilles' heel of FDUSD - if FDT really goes bankrupt, is the dollar reserve of FDUSD safe? The market swiftly fell into panic.
FDUSD decoupling and sell-off
After the news was released, the price of FDUSD quickly decoupled. On April 2nd, it fell to a minimum of $0.87 (relative to USDT), and even briefly touched $0.76 (relative to USDC), with a drop of up to 12%-24%. The 24-hour trading volume surged to $5.9 billion, as a large number of users sold off FDUSD to avoid risks.
FDT's counterattack
In the face of the crisis, FDT quickly issued a statement on the evening of April 2: "The accusations by Justin Sun are purely rumors and have nothing to do with FDUSD, only involving TUSD. We are fully solvent, and the 2.04 billion circulating supply of FDUSD is backed by 2 billion US Treasury bonds and other assets." They accused Sun of spreading FUD (fear, uncertainty, and doubt) and announced that they would take legal action, while also planning to hold an AMA on April 3 at 16:00 (Hong Kong time) in X Spaces to clarify publicly.
Why Are Stablecoins Prone to "Instability"?
The decoupling of FDUSD is not an isolated case. In 2022, TerraUSD went to zero due to algorithm failure, and in 2023, USDC briefly dropped to $0.88 due to the Silicon Valley Bank crisis. Common reasons for the instability of stablecoins include:
In the FDUSD incident, Sun's accusations directly struck at the foundation of trust, and whether FDT can prove its innocence will determine its fate.
Future Outlook for FDUSD
Short-term: The AMA of FDT and Sun's press conference will be key. If FDT can demonstrate transparent reserves, FDUSD may return to $1; if Sun presents conclusive evidence, it could trigger a larger crisis. Long-term: Hong Kong's regulation may tighten stablecoin policies, and the competitive landscape of the industry may change depending on the success or failure of FDUSD. USDT, USDC, and even USDD may benefit from this.
The FDUSD crisis is yet another reflection of trust and risk in the stablecoin market. Technically speaking, stablecoins are the cornerstone of the blockchain economy; however, in reality, their stability relies on the interplay of human nature and regulation.
Author: Rooick Z., Gate.io researcher *This article only represents the author's views and does not constitute any trading advice. Investment carries risks, and decisions should be made with caution. *The content of this article is original and the copyright belongs to Gate.io. If reprinting is required, please indicate the author and source; otherwise, legal responsibility will be pursued.