Stablecoins are meant to offer calm in the storm of crypto volatility. By holding a steady value, usually pegged to one United States dollar, they help users move funds, manage risk, and trade without constantly worrying about price fluctuations. But when a stablecoin slips below its intended value, confidence can unravel quickly.
FDUSD, a fast-rising stablecoin issued out of Hong Kong, recently experienced that exact scenario. On 2 April 2025, its value fell as low as $0.87 before recovering, triggering concern among investors and institutions alike.
The event raised important questions about what FDUSD actually is, how it works, and whether it can be relied upon going forward.
What is FDUSD?
FDUSD stands for First Digital USD. It is issued by FD121 Limited, operating under First Digital Labs, a Hong Kong-based subsidiary of the First Digital Group.
This stablecoin was created to serve as a compliant, fully backed digital dollar, one that could power cross-border payments, institutional settlements, and other financial use cases with minimal cost and friction.
FDUSD is available on multiple blockchains, including Ethereum, BNB Chain, Solana, and Sui. It is accessible through major exchanges such as Binance, Bybit, Gate.io, and decentralised platforms like Uniswap and PancakeSwap.
What sets FDUSD apart, according to its issuer, is its strict backing mechanism. Each token in circulation is meant to be fully backed by reserves, primarily in the form of short-term US Treasury bills, cash, bank deposits, and reverse repurchase agreements.
These assets are held in segregated accounts by licensed custodians in Hong Kong, and attestation reports are published monthly by third-party auditors to confirm the reserve levels. In theory, this system should ensure stability. So what went wrong?
The Depegging Incident
On the morning of 2 April, the FDUSD peg broke. Within hours, the token dropped significantly below the $1 mark, alarming traders and institutional holders. The immediate cause was not a technical flaw but rather a public allegation made by a prominent crypto figure, Justin Sun.
Sun, founder of the TRON blockchain and a figure often associated with stablecoin projects, posted claims that First Digital Trust was insolvent and unable to fulfil redemption requests.
Although his criticism focused primarily on TUSD, another stablecoin, the market response impacted FDUSD as well, likely due to their shared connections to the same issuer.
Shortly after Sun’s comments, Wintermute, a major crypto trading firm, withdrew over $30 million worth of FDUSD from Binance. The move added fuel to the fire, prompting other users to exit their positions.
The result was a sharp drop in price, with FDUSD briefly trading below $0.90 before recovering towards $0.98.
First Digital Labs responded swiftly, denying all allegations of insolvency. In a public statement, the company emphasised that the claims were directed at TUSD, not FDUSD, and that the two operations were entirely separate.
It reaffirmed that FDUSD was fully backed, with clear reserve compositions and monthly audit reports available for public review.
The company also accused Sun of spreading false information to damage a competitor and announced its intention to take legal action. Binance, while continuing to list FDUSD, called for an independent audit to verify the reserves.
Despite these efforts, the event left a significant mark. The peg has since stabilised, but trust, especially in the stablecoin market, does not return easily once it is broken.
Is FDUSD Still Safe?
Technically, nothing in the reserve reports suggests that FDUSD is undercollateralised. The February 2025 report confirmed more than $2 billion in reserve assets, exceeding the total circulating supply. The breakdown includes over 80 percent in US Treasury bills, along with deposits and cash.
But even when the numbers add up, the damage to reputation can be lasting. Many stablecoins that have previously depegged, whether briefly or permanently, have struggled to regain full market confidence. The risk is not just about the reserves but also about how quickly users react when panic sets in.
First Digital has taken steps to build trust through transparency and compliance, and its reserves continue to be audited monthly. It also operates under Hong Kong’s regulatory environment and intends to secure a stablecoin license soon.
Still, unless the issuer makes structural changes or significantly improves communication with the public, doubts may linger. For now, users are advised to stay informed, diversify their stablecoin holdings, and remain cautious until the situation is fully resolved.
Conclusion
FDUSD was launched with strong foundations and institutional backing, offering users a fully reserved and transparent stablecoin.
But the recent depegging incident revealed how fragile trust can be, even when the underlying assets remain intact. Whether FDUSD can recover depends not just on audits or redemption guarantees, but on how the team behind it responds in the months to come.