Near Protocol’s in-house stablecoin, USN, lately grew to become undercollateralized, forcing Near Foundation to recommend winding lower USN to prevent a scenario similar towards the Terra (LUNA) and TerraUSD (UST) collapse. Supporting this move, the Near Foundation opened up up a $40 million fund to safeguard investors which help them spend of USN with equal levels of wrapped Tether (USDT.e).
On March. 24, Near Foundation revealed establishing a $40 million fund, allowing qualified USN holders to redeem their USN tokens on the 1:1 basis with USDT.e. This program premiered after Decentral Bank (DCB), the issuer of NEAR-native stablecoin USN, elevated concerns concerning the stablecoin depegging because of algorithmic failure.
As a result of a current problem with USN, the @NEARFoundation is funding a protection Programme to guard USN holders.
Additional information below https://t.co/NDMZUO2Wim
— NEAR Protocol Create Without Limits (@NEARProtocol) October 24, 2022
The USN Protection Program aims to pay for the collateral gap of $40 million, that the foundation confirmed wasn’t from the Near Protocol (NEAR) token cost. Taking positive measures to safeguard investors from the possible collapse, Near mentioned:
“The NEAR Foundation is recommending that DCB wind lower USN within an orderly manner. To help with this particular process, the NEAR Foundation provides a $40m USD grant to some subsidiary of Aurora Labs – among the NEAR ecosystem’s most prominent contributors – to setup the USN Protection Programme.”
The grant was presented to an Aurora Labs subsidiary and it was immediately provided for users to switch their depegged stablecoin tokens. However, redemptions will start once DCB commences the winding lower process.
Based on DCB, USN tokens weren’t any longer algorithmic following the initial algorithmic form of USN (v1) was upgraded to v2 — making the stablecoin “susceptible to undercollateralization during extreme market conditions.”
As the eligibility criteria for investors weren’t disclosed, Near confirmed the drive will stay active for just one year until 24th March. 2023. In addition, Near announced plans to setup a stablecoin-centered funded initiative that stops collateralization-related issues to guard the investors from such catastrophes.
Near Foundation hasn’t immediate taken care of immediately Cointelegraph’s request comment.
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The Acting U . s . States Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg lately discussed stablecoin use cases with regards to the FDIC’s method of banks thinking about participating in crypto-asset-related activities.
While Gruenberg elevated concerns concerning the ever-evolving use cases and business types of crypto-assets, the FDIC confirmed its efforts to collect crucial information to assist it in comprehending and finally supplying supervisory feedback on crypto assets.
