Following the financial chaos resulting from Stream Finance’s unwinding earlier this week, Elixir has decided to discontinue its synthetic stablecoin, deUSD. The protocol announced that nearly 80% of the deUSD holders have already been completely redeemed, and the rest of the users will be receiving their redemptions in USDC once a claims portal is operational.
The decision to do so came after Stream Finance stopped withdrawals on November 4, after it was found that an external fund manager had generated losses of $93 million. It is said that Stream owes $285 million to a variety of lenders, among which Elixir holds $68 million. Consequently, the elimination of deUSD has led to a halt in operations to safeguard the remaining user funds and to avert the spread of the crisis further into the market.
deUSD was a synthetic asset launched in mid-2024 to supply a decentralized, non-custodial, and trustless alternative to Ethena Labs’ USDe. Besides, it became a very lucrative source of collateral across the DeFi industry and was even used by Hamilton Lane for wrapping their HLSCOPE fund. Nevertheless, the default of Stream Finance has been the reason behind the deficiency of liquid assets, especially since Stream had borrowed deUSD for the backing of its own xUSD token, which is currently trading below $0.20, implying a significant depegging.
This depeg has caused a domino effect in the decentralized finance projects that were supporting each other, such as the collapse of the USDX token by Stable Labs. Notwithstanding these events, Elixir is of the opinion that the deUSD is still a fully-backed asset and that the team is very much determined to allow redemptions of 1:1 for all holders. To prepare for the upcoming claims, the team has taken a snapshot of all the remaining deUSD and sdeUSD balances.
As part of the measures taken, Elixir ceased mint and redemption operations for deUSD in order to prevent new liquidity risks caused by Stream Finance’s exposure. The team has confirmed that it is coordinating with decentralized lending protocols such as Euler, Morpho, and Compound to unwind loans associated with Stream and retrieve the collateral.
Elixir emphasized that it remains the only creditor with “full redemption rights at $1” with Stream, in contrast to the rumors that Stream has been refusing to repay or close its positions. The company revealed that 90% of the deUSD supply – around $75 million – is still very tightly interwoven with Stream, and they are at the stage of recovery and reissuance of these funds to the holders who have been impacted.
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