FDUSD Stablecoin Drops Below $1 Amid Reserve Concerns and Justin Sun Allegations

FDUSD, a stablecoin issued by Hong Kong-based First Digital, briefly lost its $1 peg this week, sparking investor concern over its reserves. Prices dropped as low as $0.87 against Tether (USDT) and $0.76 against Circle’s USDC on Binance, its main trading platform. Bitcoin (BTC) momentarily surged near 100,000 FDUSD, highlighting market volatility. FDUSD later stabilized between $0.96 and $0.98—still under its $1 target.

The instability follows a CoinDesk report on Wednesday highlighting issues with TrueUSD (TUSD), another stablecoin whose reserves were allegedly tied up in illiquid investments. Tron founder Justin Sun reportedly bailed out TUSD’s issuer and claimed on X (formerly Twitter) that First Digital Trust (FDT), affiliated with FDUSD, was “effectively insolvent” and unable to fulfill redemptions.

First Digital fired back, labeling Sun’s statements as a “smear campaign” aimed at undermining a business competitor. The company insisted that FDUSD is fully backed, solvent, and secured primarily with U.S. Treasury bills. It emphasized that reserves are safe and accounted for and announced plans to take legal action to protect its reputation.

FDUSD’s latest reserve report shows over $2 billion in assets, mostly in T-bills, with some in repo agreements and fixed deposits. Despite this, stablecoin analytics firm Bluechip rated FDUSD a “C” due to concerns over whether reserves are truly bankruptcy-remote. Bluechip’s chief economist noted that while FDUSD has relatively sound backing, in a financial crisis, reserves could be used to settle debts of the parent company—posing risks to holders.

As stablecoin scrutiny grows, FDUSD’s future will likely hinge on transparency, market confidence, and legal clarity in the face of mounting allegations and competitive pressure.