WLFI's market maker DWF Labs tries to calm the fears of bad collateral

DWF Labs and Falcon Stable are fighting allegations of bad debt and low-quality collateral for the USDf stablecoin. DWF Labs is one of the market-makers and partners to World Liberty Fi, the Trump family fintech platform. 

DWF Labs and Falcon Stable are trying to dispel the allegations of bad debt and low-quality backing for the USDf stablecoin. DWF Labs is a partner and a market maker for World Liberty Fi, the lending platform and stablecoin issuer launched by the Trump family. 

DWF Labs has acquired $25M WLFI tokens during the World Liberty Fi presale, becoming one of the leading partners. The fund has functioned as a market maker, boosting the volumes for multiple meme tokens and altcoins. 

Founder Andrei Grachev defends DWF Labs collateral

Andrei Grachev, head of DWF Labs and the stablecoin issuer Falcon Stable, set out to dispel claims of shaky collaterals and risks related to the USDf stablecoin. 

Grachev announced the project is collateralized by BTC and stablecoins for over $565M, or 89% of the portfolio. The remaining 11% are collateralized by a mix of altcoins and tokens. Overall, the project holds collateral in excess, with a ratio of 116%.

The total supply of USDf is valued at $542.2M, reportedly sufficiently backed by assets. The doubts about USDf were raised as the token once again de-pegged down to $0.99. 

Falcon’s USDf accepts TRUMP meme tokens as collateral

USDf has no specific backing, and may be rebalanced with the addition or removal of altcoins. This is precisely what worried social media analysts, as the stablecoin issuer also accepted the highly volatile Official Trump (TRUMP) as collateral. 

Previously, World Liberty Fi also used its holdings of AVAX, MOVE, and SEI to mint USDf. The assets have since increased their volatility, setting up relatively risky collateral. World Liberty Fi minted $2M USDf, a relatively small amount, though still exposing both projects to risk. 

USDf is also partially backed by hedged positions. The reported collaterals are also not detailed, leading to allegations of hidden bad debt or collaterals that cannot be easily liquidated to support the stablecoin. 

The USDf stablecoin trades mostly on decentralized protocols, relying on CurveFi and Uniswap V3. Falcon Stable has a transparency board, which does not include a detailed breakdown of assets. 

It is precisely the mixed bag of crypto collaterals that is worrying, especially after the latest de-peg of USDf. While the stablecoin has a relatively small impact, it can still erase value, while affecting the reputation of World Liberty Fi and DWF Labs. 

The usage of TRUMP and risky coins to back the USDf asset also recalls the case of Terra (LUNA), which used its own token to back the issuance of more TerraUSD stablecoins. Usually, stablecoins use ETH or SOL as collateral, with fewer issuers agreeing to high-volatility assets.

Currently, all crypto collaterals are declared together as ‘other’ assets, with no differentiation between BTC and riskier assets, including meme tokens. Falcon holds $25.33M in on-chain reserves, including DeFi protocols and staking. 

The rest of the collaterals are held off-chain, using Fireblocks, Ceffu, Binance, and ChainUp as custodians. Additionally, the known wallets of DWF Labs contain $14.4M in mostly altcoins, of which around $5M in ETH.

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