The nightmare of TerraUSD (UST) is not about to be forgotten by its former investors, who lost over 30 billion dollar equivalents last May. The Luna Foundation stablecoin, created by Do Kwon (now wanted by Interpol) is certainly the biggest crash in the cryptocurrency world to date and has left its mark.
For other crypto projects, lots of lessons to be learned. And precisely, for the stablecoin USN, from the NEAR foundation, it is time for caution. Its token will gradually be withdrawn, for lack of guarantee.
The NEAR blockchain, which wants to compete with Ethereum, had been offering USN since April, a few weeks before the fall of TerraUSD (UST). It too is part of the controversial family of algorithmic stablecoins, which are not backed by an existing fiat currency reserve (and placed in a bank), but by a computer protocol.
The regulation, for TerraUSD, was completely out of control after extraordinary movements occurred in the volumes of exchange, in particular on the crypto-currency Terra (Luna), which also lost all of its value in record time.
Balance is no longer guaranteed
Little by little, the USN had learned lessons from TerraUSD by switching from its algorithmic protocol to a more traditional protocol, with a reserve currency. It was backed by USDT, the largest stablecoin by volume in the cryptosphere. Things did not go as planned and the balance is no longer guaranteed today. For the NEAR foundation, the risks would therefore be significant for its token to gain the equivalent of 1 USN = 1 USDT = 1 US dollar.
Decentral Bank, which manages the stablecoin, said in a statement: “USN has faced many headwinds over the past several months with an increased focus on regulation and shifts in market perception following recent high-profile incidents. […] Because of these issues, we have made the difficult decision to end the USN Project in a controlled and responsible manner, in a way that ensures the protection of USN holders.”
In his letter, they tried to reassure by explaining that incidents could only happen due to extreme conditions in the market – and since the fall in the price of Bitcoin and the arrival of the bear marketthe volumes traded are no longer as high as what was recorded between 2020 and 2021.
That said, a fund of $40 million has still been released by NEAR to protect investors throughout this closing operation. The idea is not to fall into the same traps as TerraUSD and its founder Do Kwon, who is currently wanted by Interpol (having appeared on a red notice since September).
The arrest warrant for the developer behind the TerraUSD, “to serve his sentence”explained Interpol, is a “dangerous precedent” for Hasseb Qureshi, from Dragonfly, a well-known investor in the world of web3. Since the fall of Bitcoin, however, the troubles for companies seeking to compete with flagship blockchains could not leave regulators passive. Celsius, a cryptocurrency lender that has been bankrupt since June, had frozen withdrawals for its users. Another nightmare.
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