On Monday, the NEAR Foundation, an organization that advocates for the NEAR blockchain, declared that it is terminating its stablecoin, known as USN. The stablecoin began displaying perilous traits similar to those seen in the TerraUSD stablecoin, which catastrophically fell this year and caused investors to lose money aggregating more than $30 billion, according to the foundation, which announced that it will shut down.
According to the Near Foundation, USN is now undercollateralized, which means there is not enough collateral to sustain the stablecoin.
The DAO Decentral Bank's USN stablecoin (DCB) was introduced through the NEAR protocol in April. However, under-collateralization is a dilemma with algorithmic stablecoins, particularly under “destructive market circumstances,” as Decentral Bank recently informed the Near Foundation. DCB also divulged that there was double-minting of USN, a factor that contributed to the under-collateralization.
Decentral Bank announced on Monday that the USN project would be halted. According to Decentral Bank, “USN has faced many headwinds over the last few months with an increased regulatory focus and changes in market perception from recent high-profile incidents,”
Due to these vulnerabilities, according to Decentral Bank. To ensure that holders of USN are safeguarded, they have made the tough choice to shut down the USN project. The USN Protection Programme will be funded with $40 million, according to the NEAR Foundation, in order to safeguard investors while the stablecoin is phased out.
The USN stablecoin from NEAR Protocol was previously introduced in April as an algorithmic stablecoin, but it was subsequently transformed to be backed by USDT tokens, the most significant stablecoin in the cryptocurrency market. The NEAR Foundation stated that USN continued to be “susceptible to under-collateralization during extreme market conditions”.
Although stablecoins are highly perceived as the foundation of the cryptocurrency industry, commerce in these tokens has recently come under unprecedented federal regulation, mostly as a result of the devastating collapse of the TerraUSD stablecoin in May. TerraUSD was an algorithmic stablecoin that had no physical underpinning and instead was predicated on programming to keep its value static. Eventually, this code yields, causing the stablecoin to relinquish its foundation and wreck.
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