By Key Points
- USDF Depegs to 94 Cents Despite DWF’s 116% Collateral Claim.
- DWF Labs claims 116% overcollateralization, yet reserves lack clarity.
- $609M of USDF’s backing is held off-chain with no transparency.
- Fears rise over stablecoin risk and DWF’s growing political ties.
The crypto community was caught off guard as USDF depegs from its $1 value, sinking to 94.3 cents before slowly recovering. USDF, issued by Falcon Futures and backed by DWF Labs, holds over $540 million in market cap—but the slip sparked sharp concern.
Falcon Futures claimed USDF is 116% over-collateralized, yet the catch lies in the details. Out of all reported reserves, $609 million sits off-chain. Only $25 million is verifiably on-chain. This raised serious doubts about the stablecoin’s real backing.
USDf depegging from $1 overnight amid rumours surrounding the quality of its collateral base
On-chain liquidity appears to be dwindling quickly too pic.twitter.com/HgJFBI1dEE
— parsec (@parsec_finance) July 8, 2025
What’s worse? No one really knows what’s in those off-chain reserves. There’s been no public audit showing what assets are held, how liquid they are, or how they’d react under pressure. Falcon’s latest disclosures are vague, with no transparency on asset breakdown, pricing risks, or liquidation impact.
The depeg incident lasted less than an hour but has left a permanent mark on USDF’s credibility. Even a short-lived depeg can trigger loss of trust, especially in a market already sensitive to volatility and past failures—like the recent Grayscale ETF delay that stirred market hesitation.
Trust, but verify.
✅ We work with https://t.co/PkIl4ySRV4 to provide independent Proof of Reserves
✅ Daily reserve attestations, currently 116.98% overcollateralized
✅ Overcollateralization Ratio (OCR) applies to non-stablecoin mints, calibrated per asset based on risk… pic.twitter.com/9NWQLoqlg9
— Falcon Finance (@FalconStable) July 8, 2025
Why This USDF Depeg Could Shake Trust
At first glance, the numbers look strong—over 100% collateral and a $570 million market cap just four months post-launch. But stablecoins are only as trustworthy as their transparency, and in this case, the fog is thick.
Crypto watchdog LlamaRisk published a blunt warning about USDF’s setup. According to them, Falcon’s team has total control over the reserve assets, including those held on centralized exchanges and DeFi platforms. That means any poor strategy or misstep can risk solvency.
— Andrei Grachev (@ag_dwf) July 8, 2025
The concern deepens because no automated liquidation protections or decentralized governance appears to be in place. If things go wrong, there’s no backup plan. USDF holders are exposed to decisions made behind closed doors.
To make things more complex, DWF Labs isn’t a stranger to controversy. Based in the UAE, the firm has faced allegations of wash trading, and even abuse-related scandals involving partners. Despite this, DWF has grown closer to Donald Trump’s crypto ambitions, including liquidity support for USD1, a rival stablecoin project under the World Liberty Financial banner.
With DWF getting deeply involved in politically ambitious projects, incidents like this cast a long shadow. If stablecoins like USDF are to become a key part of global dollar dominance, as Trump suggests, technical errors and unclear reserve details could undermine the entire plan.
Falcon Finance says it will release a full breakdown of reserves “next week,” but for now, confidence is shaken. Analysts say it’s hard to trust numbers without proof, and users will remain cautious until clear transparency is delivered.
Falcon Stablecoin’s Off-Chain Reserves. Source: Falcon Finance – Techtoken
This echoes broader market tension seen in recent Bitcoin transfer theories and whale movements that often shake user confidence without clear explanations.
DWF Labs’ Growing Influence and Market Risks
The timing of this USDF depeg raises larger questions about DWF Labs’ expanding presence in the Web3 space. In just a few months, the firm has become a major liquidity provider, media figure, and political player—especially with its partnership in USD1, a cornerstone of Trump’s crypto vision.
But this influence comes with baggage. DWF has been linked to several scandals, including internal controversies and aggressive trading behavior. Critics argue that centralized decision-making, lack of audits, and ambitious scaling without solid fundamentals could result in more issues ahead.
Hey yes, we already have a UI mockup done, will update the transparency page next week
You will see a proper assets breakdown, lock BTC, stables , altcoins— Andrei Grachev (@ag_dwf) July 8, 2025
Just last week, we saw a big crypto shakeup with major market moves, Solana ETF buzz, and rising government scrutiny. Events like USDF’s depeg only reinforce the idea that much of the current ecosystem still lacks the stability that institutional investors need.
With the GENIUS Act aiming to introduce strict transparency rules for U.S.-based stablecoins, there’s a growing gap between regulatory expectations and how offshore-backed projects like USDF currently operate. These differences may impact adoption, especially if institutions begin evaluating stablecoin risk profiles more carefully.
Private LP deals here were smth around 35% fixed in future tokens at a certain (high) FDV
DWF might defend the peg, but launching a token with a good valuation to pay to LPs will be much more complicated now https://t.co/ubRpkDcamu pic.twitter.com/ecnJ9jVrXA
— DMH 🦇🔊🌊 (@DeFi_Made_Here) July 8, 2025
Security also remains an open question. While the spotlight is on transparency here, North Korean hacker-led NFT thefts show how easily assets can be compromised when proper protection is absent.
If DWF Labs wants to position itself as a serious long-term player, it must move beyond vague claims and offer real-time disclosures, third-party audits, and verifiable on-chain proofs. Until then, incidents like this will continue to raise eyebrows—and erode trust.
remember looking at it the other day wondering how this stablecoin i never heard of got to $600m tvl
my #1 rule to avoid rugs is to run if a project has any questionable associations (like DWF in this case)
back founders with integrity and you’ll be just fine in this space https://t.co/kczvV3bMl1
— lito (@litocoen) July 8, 2025
Meanwhile, community confusion surrounding staking platforms like Pi Network indicates that projects offering financial instruments without clarity or consistency are losing user loyalty rapidly.
For those looking at the broader picture, early projects like Pump.fun’s token presale demonstrate how important clear mechanics and trust have become in a hyper-aware crypto community.
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