Importance Of Compliant Stablecoins Hits Home As USDX, DEUSD Stablecoins Decouple
Importance Of Compliant Stablecoins Hits Home As USDX, DEUSD Stablecoins Decouple. Photo By Andrew W On Unsplash.
This week the USDX stablecoin issued by Stables Labs and deUSD by Elixir have decoupled from their dollar peg.
The former happened as a cascading effect of a recent $100M+ exploit of an Ethereum pool in the Balancer DeFi protocol based on an older version V2 contract, which in turn heavily affected some of the liquidity pools and borrowing rates available for some synthetic stablecoins. Stables Labs made an official statement regarding the incident:
There was another party involved that held and traded the asset, Stream Finance - that uses alternate yield strategies - and lost about $93M in the huge liquidation event that happened a few weeks back on October 10th, which continues to impact some of the players in the market (many of whom have not disclosed the full range of losses).
Any yield-bearing coins or delta-neutral assets using the umbrella term 'stablecoins' that principally rely on riskier yield strategies, optimal liquidity arrangements in non-volatile market conditions or on illiquid and weaker collateral need to have better risk management and clearer term labelling to distinguish from safer stablecoins that are collateralised with short-term U.S. Treasuries or cash-equivalents as per the Genius Act or similar.
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