NEAR’s stablecoin USN is being shut down. Holders will be able to withdraw their funds in USDT

According to a recent statement issued by the NEAR Foundation, NEAR’s USN stablecoin has become undercollateralized. To safeguard users, the project has launched a so-called “Protection Programme” which will allow all “eligible USN holders” to redeem their USN at a 1:1 ratio with USDT. Furthermore, as the USN token seems to be susceptible to future such problems, the stablecoin is being shut down.

USN was launched in April this year and is issued by a DAO named Decentral Bank. A Medium blog post by the organization confirmed the plans to wind down the USN stablecoin. Describing the reasoning behind the algorithmic stablecoin’s creation, Decentral Bank states that at the time of its launch, there was no native stablecoin available on the NEAR blockchain network.

At first, USN was a partially algorithmic asset, pegged to the US dollar, however risks of undercollateralization made the team reconsider the mechanics behind the token, and it was updated to USN v2, where minting of the asset was only allowed in exchange for USDT. Nevertheless, as Decentral Bank admits, in spring 2022, the risk of undercollateralization materialized in a collateral gap of around $10 million, which has now grown to $21 million.

Due to this, recent increased regulatory focus, and overall market conditions, the Decentral Bank DAO has decided, along with the Near Foundation, to wind down the USN stablecoin project. To ensure the project ends in a “controlled and responsible manner” and to protect USN token holders, White Knight Protection – a subsidiary of Aurora Labs, funded by a NEAR Foundation grant is starting a USN Protection Programme, that will allow any USN holder to cash out their funds.

Minting of new USN is now permanently stopped, liquidity managed by Decentral Bank has been removed, and the current state of USN reserves includes 38.9 million USDT and 5.7 million NEAR tokens.