UXD Stablecoin Protocol Shuts Down

Solana SOL-based stablecoin protocol UXD is shutting down, as announced by its governance board on Monday, pending approval of a governance proposal. The team plans to return its multi-million dollar insurance fund to token holders and investors, a process expected to take up to two years.

“This decision was not made lightly, as UXD has successfully navigated a number of challenges in the past. The UXD stablecoin has been stable through various market regimes and is integrated across many of the top DeFi protocols on Solana, reaching a maximum Total Value Locked (TVL) of $40 million,” the team stated.

The team believes that sunsetting the project and returning capital to investors is the best use of resources. Token holders will vote on the winddown terms, including handling around $10 million worth of unvested UXP governance tokens, following the protocol’s initial $57 million token sale to 3,676 investors. The price of UXP has risen 40% since the announcement, with stakeholders eligible to vote for the next seven days.

Despite stablecoins being a prominent blockchain application, UXD struggled to gain traction among DeFi users due to perceived lack of liquidity and competition with established centralized stablecoins.

The two largest stablecoins, Tether’s USDT and Circle’s USDC, have a combined market cap over $140 billion, largely dominated by USDT, which is backed by cash and investments.

Launched in 2021, UXD shifted from a delta-neutral hedging strategy based on perpetual futures to an Asset Liability Management Module pegged to the dollar through low-volatility, yield-generating assets. Its current market cap stands at $7.45 million.

Following a nearly $20 million loss during a significant exploit, the protocol temporarily paused minting. Currently, UXD is backed by the Credix Fintech pool, which holds illiquid investments complicating redemption. The team expects to mint enough UXD for holders to redeem their funds in USDC over the following months.

Meanwhile, UXP holders can withdraw against the insurance fund in a six-month conversion phase. The DAO vote shows nearly 1 million votes supporting the plan to end the project, with no dissent.

UXD Protocol was overseen by a DAO and secured $3 million in seed funding from notable investors, including Multicoin Capital, Alameda Research, and the Solana Foundation.