Near blockchain has shut down its stablecoin project after it showed risky characteristics similar to those observed with TerraUSD. This year, TerraUSD cryptocurrency failed and lost investors billions of dollars, and at that time, the dangerous features that appeared during its failure are now similar in Near blockchain.
Near is a popular blockchain for building decentralized apps and minting NFTs, and it is also a competitor of Ethereum. It also has its stablecoin, which the DAO Decentral Bank issued in April. But, according to a Near Foundation’s statement on Monday, USN recently became undercollateralized. This statement means that there is not enough collateral supporting the token.
Near Foundation, a non-profit which supports the blockchain added that, as a result, it would shut down the token. After one day after this announcement, Decentral Bank also announced that it would indeed be winding down the USN project.
In a statement, Decentral Bank said that USN had faced many headwinds over the last few months with an increased regulatory focus and changes in market perception from recent high-profile incidents. Due to these issues, the bank said we had decided to wind down the USN project. Moreover, the bank said it did it in a controlled and responsible manner to ensure USN holders are protected.
Stablecoins are considered the backbone of the crypto economy, and these are digital assets supported by real-world goods, such as the US dollar or other fiat currency reserves. But after Terra, which was one of the most prominent blockchains with a market cap of over $30 billion, it completely collapsed in May. Because of that, regulators have kept a close eye on them.
Terra had its algorithmic stablecoin, TerraUSD, which primarily relied on code to maintain its value and was not backed by anything. The reason behind its fall was its code, which failed and led the stablecoin to lose its peg and crash.
After TerraUSD’s fall, many investors got burnt, and lawmakers talking about regulating the crypto world referred to the Terra project’s collapse. However, Near blockchain’s USN was also an algorithmic stablecoin when it first launched, but it changed after support from USDT tokens.