The NEAR Foundation, an organization that supports the NEAR blockchain, announced on Monday that it is liquidating its stablecoin, popularly known as USN.

The foundation said it is shutting down the stablecoin after the token began exhibiting risky characteristics similar to those seen in the TerraUSD stablecoin which crashed horribly this year and lost more than $30 billion worth of investor funds.

The Near Foundation said that USN recently ran out of collateral, meaning there is not enough collateral backing the stablecoin.

In April, the NEAR protocol launched its USN stablecoin issued by the DAO Decentralized Bank (DCB). However, the Decentralized Bank Recently informed the Near Foundation that the stablecoin had run out of collateral, a condition that is associated with algorithmic stablecoins, especially in “extreme market conditions.” DCB further revealed that there was also double USN minting, a condition that contributed to undercollateralization.

In a statement issued on Monday, Decentral Bank said it would shut down the USN project. “USN has faced many headwinds in recent months with increased regulatory focus and changes in market perception due to recent high-profile incidents,” Decentral Bank stated.

said the Decentralized Bank due to such problems. They have made the difficult decision to close the USN project in a responsible manner that ensures the protection of USN holders. The NEAR Foundation said it is using $40 million to fund a “USN Protection Program” to protect investors as the stablecoin dries up.

When NEAR Protocol’s USN stablecoin first launched in April, it was an algorithmic stablecoin, but was later changed to be backed by USDT tokens, the largest stablecoin in the crypto market. Despite the upgrade, USN became “susceptible to undercollateralization during extreme market conditions,” which could put investors at risk, the NEAR Foundation explained.

While stablecoins are considered the backbone of the crypto economy, regulators have recently launched increased scrutiny against trading in such tokens, primarily due to the fatal collapse of the TerraUSD stablecoin in May. TerraUSD was an algorithmic stablecoin that was not backed by anything, but relied on code to hold its value. This code eventually failed, leading the stablecoin to lose its peg and crash.

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