To avoid scenarios similar to Terra (LUNA) and UST collapse, NEAR Foundation launches USN Protection Programme.
NEAR Foundation, an organization behind NEAR blockchain, has set up a $40 million fund, dubbed USN Protection Programme.
According to the blog post shared on October 24th, NEAR Foundation has launched the fund to protect users from issues related to NEAR-native stablecoin, USN.
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As the blog post notes, the NEAR Foundation has been recently contacted by USN issuer, Decentral Bank (DCB), remarking that stablecoin has become undercollateralized. It is reported that USN depegged due to algorithm failure.
Therefore, to control the situation and avoid issues similar to Terra (LUNA) and UST collapse, NEAR Foundation launched a $40 million USN Protection Programme. In its announcement, the Foundation noted:
The NEAR Foundation is recommending that DCB wind down USN in an orderly manner. To assist with this process, the NEAR Foundation has provided a $40m USD grant to a subsidiary of Aurora Labs – one of the NEAR ecosystem’s most prominent contributors – to set up the USN Protection Programme.
By entering USN Protection Programme, users will be able to reclaim their USN tokens on a 1:1 basis with USDT.e.
In a separate announcement, Decentral Bank highlighted that in spring 2022, the first signs of USN collateralization came into action. At that time, the collateral gap grew to $10 million. However, the company noted that the gap is now worth $21 million, “considering that ~5M NEAR were left in the reserves and kept falling in price.”
Decentral Bank highlighted that the minting of USN was permanently stopped. Moreover, DCB has reportedly “removed liquidity managed by DCB from pool #3020 on Ref.finance, destroying over 40M USN.” Decentral Bank ended its announcement by stating:
The DCB team would like to apologize to the entire NEAR community for this regrettable event. The team has worked incredibly hard to self-rectify this issue but were unable to. We are grateful to the NEAR Foundation, Aurora and wider community for their support in best protecting our users.
It is worth noting that the price of NEAR has noticed a relatively small price drop. At the time of writing, NEAR retails for $2.91, recording a 2.52% decline.
