HUSD developers explained the reason for the loss of the peg of the stablecoin to the dollar

What’s new? On August 18, the rate of the stablecoin of cryptocurrency exchange Huobi (HUSD) lost its peg to the US dollar, dropping to $0,82. The developers of the stablecoin explained that the loss of parity was caused by the closure of market maker accounts in some regions in accordance with legal requirements. According to them, the time difference in banking hours led to a short-term liquidity problem, which was subsequently resolved. As of August 20, 10:15 UTC, the rate of the asset has recovered to $1, according to CoinGecko.

Recently, we had made the decision to close several accounts in specific regions to comply with legal requirements, which included some market maker accounts. Due to the time difference in banking hours, this resulted in a short-term liquidity problem but has since been resolved.— HUSD (@Stablecoin_HUSD) August 19, 2022

Community reaction. The incident alarmed members of the crypto community, with some speculating that HUSD could become the first centralized stablecoin to collapse. In May, the algorithmic stablecoin TerraUSD (UST) collapsed almost to zero, which subsequently led to the crash of the entire blockchain ecosystem.

HUSD was once one of the safest stablecoins. Now it's off its peg. If HUSD doesn't return to $1, it'd be the first fully-reserved centralized stablecoin to fail. pic.twitter.com/9WmROQR6lD— John Paul Koning (@jp_koning) August 18, 2022

In response to these concerns, the Huobi team announced that they had contacted the stablecoin issuer, Stable Universal Limited, and were working to restore stability. Representatives of the exchange urged users to be attentive and aware of any potential risks associated with market volatility.

Given the recent volatility in the cryptocurrency market, we advise our users to pay close attention to and be aware of potential risks.— Huobi (@HuobiGlobal) August 19, 2022

What is known about HUSD? Stablecoin was launched in 2018. Huobi decided to create its own stablecoin after noticing problems with Tether (USDT). The ERC-20-based HUSD is used as an aggregator for other stablecoins such as True USD (TUSD), USD Coin (USDC), Paxos Standard (PAX), and Gemini Dollars (GUSD). Thus, any of these coins appear on Huobi in the form of HUSD. The asset is backed by fiat currency and undergoes monthly audits in the United States.

On August 14, the stablecoin Acala Dollar (aUSD) lost its peg to the dollar due to a hacker attack on the DeFi platform Acala, which produces it. The rate of the stablecoin collapsed by 95%, from $1,02 to $0,05. At the moment, the asset has not regained parity with the dollar and is trading at $0,82, according to CoinMarketCap.