This stablecoin project was shut down after suffering $40 million collateral gap
|- The decentralized autonomous organization (DAO) behind Near protocol-based USN stablecoin announced unwinding of the project on October 24.
- Decentral Bank, the DAO has permanently halted new USN minting after the stablecoin suffered a $40 million collateral gap.
- USN tokenholders can redeem the stablecoin using decentralized applications of Decentral Bank or Aurora Labs for the next 12 months.
After the $41 billion implosion of Terra’s algorithmic stablecoin UST and sister token LUNC (previously LUNA), the crypto industry is wary of collapses. Decentral Bank, the DAO behind USN stablecoin, announced that it is unwinding the project due to a $40 million collateral gap.
Also read: Investigative crypto journalist accuses staking platform Freeway of rug pull
USN stablecoin on the Near protocol blockchain is winding shop
The Near Foundation, a community-driven non-profit foundation maintains the NEAR protocol. It was set up by the decentralized autonomous organization (DAO) Decentral Bank who recently announced that the USN stablecoin project will be unwinded due to the $40 million collateral gap.
For a stablecoin project, collateral is key. Crypto-backed stablecoins use cryptocurrencies as collateral. Users typically deposit and lock other cryptocurrencies to create stablecoins and they are generally over-collateralized to account for volatility. The stablecoin DAI is pegged to the US Dollar and one DAI is the equivalent of one USD.
Similarly, collateral was key to the USN stablecoin project. However the stablecoin suffered a collateral gap of $40 million resulting in its unwinding. The Near-native stablecoin was created and launched by Decentral Bank (DCB) and the organization supporting the Near blockchain announced that a $40 million fund was set aside to fund a “USN Protection Programme.” DCB has 5.7 million NEAR worth $16.7 million. DCB recently issued a statement saying that it will donate its NEAR tokens to the community.
Since discovering the $40m collateral gap Decentral has permanently halted the minting of new USN but existing holders can redeem their tokens for USDT through the USN Protection Programme. The USN Protection Programme is backed by a grant from the Near Foundation. The foundation issued a statement,
This collateral gap of $40m USD is fully covered by the USN Protection Programme. The NEAR Foundation is recommending that DCB wind down USN in an orderly manner.
USN holders who have completed their Know-Your-Customer (KYC) and Anti-Money Laundering checks have access to the redemption program that is live for 12 months. Holders have an option to redeem their USN stablecoin using the decentralized applications Decentral Bank or Aurora Labs over the next year.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.