DeFi protocol Neutrl suspended minting and redemptions for its NUSD synthetic dollar after unspecified circumstances affected protocol reserves. The protocol also paused other functions on legal advice, leaving the cause and scale of any potential impairment unclear. Neutrl did not identify the affected asset or counterparty, nor did it state whether reserves suffered a realized loss.
The suspension impacts approximately $53.6 million in NUSD currently in circulation. It prevents approved counterparties from exchanging the token for its backing assets while Neutrl assesses its reserves. The protocol has not provided a timeline for resuming operations or outlining next steps.
Structured-yield protocol Strata confirmed it paused minting, redemptions and related functions for contracts within its Neutrl market, which supports several NUSD-linked products. Strata clarified that its other markets remained operational despite the issue impacting NUSD products.
According to data from RWA.xyz, NUSD had a market capitalization of about $53.6 million on Friday. The synthetic dollar recorded 615 holders and 347 active addresses over the past 30 days. Monthly transfer volume for NUSD fell 72.4 percent to $71.4 million in the preceding 30 days.
NUSD was trading at approximately $0.9984, RWA.xyz showed. The synthetic dollar is designed to track the U.S. dollar by using yield-bearing crypto assets and market-neutral strategies, rather than relying on deposits held in a traditional bank.
A February assessment by risk-advisory team BA Labs had previously classified a proposed Neutrl integration as higher risk. BA Labs cited concerns regarding counterparty, operational and liquidity exposure within the protocol's structure.
At the time of BA Labs' February assessment, NUSD supply was estimated at $226 million, with reserves totaling $233.7 million. This implied a collateralization ratio of 103.6 percent for the synthetic dollar.
BA Labs detailed that over 87 percent of Neutrl's reserves were held through Fireblocks, with smaller portions located on centralized exchanges. The assessment noted that direct redemptions were limited to KYC or KYB-approved counterparties. Requests exceeding Neutrl's liquid buffer could enter a queue, targeted for completion within 48 hours, but without a specific guarantee.
On May 25, verification platform Accountable stated that its Neutrl dashboard provided continuous cryptographic proof indicating that NUSD reserves matched the protocol's liabilities at that time.
