Stablecoin developer Usual is facing scrutiny after making changes to the redemption mechanism for USD0++, its yield-bearing staked token linked to the USD0 stablecoin.
USD0++, which is the staked version of the USD0 stablecoin by Usual, experienced a drop in value to $0.92, which is 8% below its previous redemption value. This drop occurred following the implementation of new early exit options that triggered a sell-off and disrupted the largest Curve pool associated with the token.
It is important to note that USD0++ is not a stablecoin itself, but rather a staked version of USD0 that requires users to lock their funds for a period of four years in exchange for earning USUAL tokens as rewards. Previously, USD0++ could be redeemed at a 1:1 ratio with USD0. However, the recent changes introduced by Usual now require users to choose between two exit options. They can either opt for a conditional exit, where they can redeem at a 1:1 ratio but forfeit a portion of their accrued rewards, or an unconditional exit at a floor price that starts at $0.87 and gradually increases to $1 over the four-year lock-up period.
These changes have transformed USD0++ into a hybrid instrument that combines elements of a bond and a yield farming tool. While users with a higher risk tolerance can stake USD0 into USD0++ to farm USUAL tokens with potentially high yields, more conservative holders can lock their funds for four years to earn a fixed annual yield of 4%.
However, these alterations have made USD0++ riskier and less attractive to investors. The long lock-up periods and changing redemption rules have made it less appealing compared to more liquid options, leading to a wave of selling as traders and yield farmers sought to exit their positions. This selling pressure caused the largest Curve pool associated with USD0++ to become unbalanced and pushed the token’s price below $1.
As of the time of writing, Usual Labs, the company behind the Usual protocol, has not issued any public statements regarding the price changes of USD0++. In 2024, Usual Labs managed to raise $7 million and secured a commitment of $75 million in total value locked for USD0 from investors such as IOSG Ventures, Kraken Ventures, GSR, Mantle, Starkware, and Flowdesk.
It remains to be seen how Usual Labs will address the concerns raised by the recent changes to USD0++ and whether they will take any corrective action to restore confidence in the token among investors and users.