Near Foundation sets up $40M fund to bail out USN investors in case of collapse

cointelegraph.com:

Near Protocol’s in-house stablecoin, USN, recently became undercollateralized, forcing Near Foundation to recommend winding down USN to prevent a situation similar to the Terra (LUNA) and UST collapse. Supporting this move, the Near Foundation opened up a $40 million fund to protect investors and help them cash out of USN with equal amounts of wrapped Tether (USDT.e).

On Oct. 24, Near Foundation revealed setting up a $40 million fund, allowing eligible USN holders to redeem their USN tokens on a 1:1 basis with USDT.e. The program was launched after Decentral Bank (DCB), the issuer of NEAR-native stablecoin USN, raised concerns about the stablecoin depegging due to algorithmic failure.

In response to a recent issue with USN, the @NEARFoundation is funding a protection Programme to safeguard USN holders.More details below https://t.co/NDMZUO2Wim

The USN Protection Program aims to cover the collateral gap of $40 million, which the foundation confirmed was not linked to the NEAR token price. Taking proactive measures to protect investors from a possible collapse, Near stated:

The grant was provided to an Aurora Labs subsidiary and was immediately made available for users to exchange their depegged stablecoin tokens. However, redemptions will begin only after DCB commences the winding down process.

According to DCB, USN tokens were no longer algorithmic after the initial algorithmic version of USN (v1) was upgraded to v2 — making the stablecoin “susceptible to undercollateralization during extreme market conditions.”

While the eligibility criteria for investors were not disclosed, Near confirmed that the drive will remain active for one year until 24th Oct. 2023. Furthermore, Near announced plans to set up a stablecoin-centered