The NEAR Foundation will terminate its algorithmic stablecoin USN in the coming months. The organization launched a program to support the digital asset’s wind-down.
Algorithmic stablecoins attracted much attention during the past crypto bull run. Their collapse will go on to be a hallmark of this bear market. In that sense, the crypto industry is coming to the end of an era.
In early 2022, the biggest algo stablecoin, TerraUSD (UST), de-pegged from the U.S. dollar leading to the downfall of the Terra ecosystem and other entities in the crypto space. At that time, the NEAR Foundation announced their algo stablecoin USN, with similar characteristics to UST.
The organization acknowledged that the digital asset became undercollateralized. Data from Coingecko indicates that the value of USN is fluctuating and recording spikes in volatility in the past week.
UST went through a similar scenario, but the NEAR Foundation seems determined to prevent another LUNA-like fallout. In that sense, the organization launched the USN Protection Program grant valued at $40 million.
These funds will be used to allegedly protect NEAR and USN investors by providing them with a secure channel to redeem the digital asset. According to an official announcement, the program will run by a subsidiary of Aurora Labs, a “prominent” NEAR contributor.
NEAR Takes Additional Steps To Prevent LUNA-Like Fallout
The organization claims that “extreme market conditions” led to the under-collateralization of USN. Since the inception of the stablecoin, the crypto market has lost over 70% of its total market capitalization.
Large cryptocurrencies, such as Bitcoin and Ethereum, continued their downtrend, crashing from around $40,000 and $2,000 to their 2017 levels. In this context, the NEAR Foundation offers USN holders an “orderly” way to exchange their digital assets with the Protection Program grant.
(…) 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 which is now live
The program will be live from now until October 24th, 2023. Thus, USN holders will have one year to redeem their assets while the entity behind the stablecoins terminates its operations. The foundation added:
We’re confident this action best safeguards users and the wider NEAR ecosystem by funding the known collateral gap. The NEAR Foundation is confident that as the ecosystem grows and matures, this type of intervention should not be required in the future.
The organizations expect users and assets in the Near ecosystem to be protected against “situations of rapid innovation.” The foundation claims to work with the community and the NEAR Digital Collective to set up “robust community standards and guardrails.”