Huobi Global provides post-mortem on HUSD Depeg
Important takeaways
- Huobi Global has now resumed trading with HUSD; the stablecoin had lost its connection for 12 hours.
- Stable Universal indicated that it had closed 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.
Liquidity crisis
Huobi Global has provided a brief 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 connectivity on August 18 around 22:00 UTC. The depeg event lasted 12 hours.
Stablecoins are cryptocurrencies designed to stay at par with government-issued currencies such as the US dollar or the euro. HUSD is not 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 performance that, after breaking parity, HUSD traded as low as $0.87 for a brief period. Stabile Universal claims that HUSD can be redeemed on a one-to-one basis for dollars.
The official Twitter page for HUSD on explained that the curtailment was caused by a “decision to close several accounts in specific regions to comply with legal requirements, which included some market maker accounts,” which the team said resulted in a short-term liquidity crisis.
Stablecoin depegs have become recurring events in the crypto space following the broader market’s decline this year. In May, Terra’s algorithmic stablecoin UST lost its connection 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 link this year. In June, for example, TRON’s USDD stablecoin was similarly depegged, although it slowly recovered parity with 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.
