World Liberty Financial’s USD1 stablecoin has experienced a significant drop in market capitalization over the past two weeks, with over $400 million lost due to large redemptions on Ethereum and BNB Chain. The firm noted that nearly $200 million in BNB Chain redemptions originated from a single unidentified address, though they could not determine who controlled the funds or the reason for the redemptions. On Ethereum, over 99% of tokens sent for redemption passed through a wallet labeled BitGo, USD1’s current issuer and custodian, while the BNB Chain transfers from the unidentified address were made in batches of $30 million to $50 million. Onchain Benchmark also noted that the supply contraction on Ethereum was steeper than that of several other US dollar-denominated stablecoins between October 6 and October 15.
The report also highlighted that transfers between Ethereum and BNB Chain totaled less than $1 million, suggesting the missing supply wasn’t simply shifted between those networks. Onchain Benchmark concluded that the next tests come with the change of issuer. When World Liberty’s trust company opens, it will take on a token whose size depends on the decisions of a few large holders, under a charter whose legal footing is being argued in court. Whether fresh mints on Solana, or anywhere else, rebuild the total, or October marks the size USD1 carries into its new issuer, is the question the next weeks of supply data will answer.
The situation underscores the challenges faced by stablecoins in maintaining their value and supply stability, particularly when dealing with large redemptions and potential legal uncertainties surrounding their issuance and custody.