Decentralized finance protocol Neutrl has suspended minting and redemptions for its NUSD synthetic dollar, citing unspecified circumstances that affected protocol reserves. The protocol also paused other functions on legal advice, with the cause and scale of any potential impairment remaining unclear.
Approximately $53.6 million in NUSD is currently in circulation. The suspension prevents approved counterparties from exchanging the token for its backing assets. NUSD was trading at about $0.9984 on Friday, according to data from RWA.xyz.
Structured-yield protocol Strata subsequently paused minting, redemptions and related functions for contracts within its Neutrl market, which supports several NUSD-linked products. Strata confirmed its other markets remained operational.
Neutrl has not identified the specific affected asset or counterparty, nor has it confirmed whether its reserves suffered a realized loss. The protocol has not provided a timeline for resuming operations, stating it will offer timing and next steps when available.
In February, risk-advisory team BA Labs classified a proposed Neutrl integration as higher risk, citing concerns regarding counterparty, operational and liquidity exposure. BA Labs estimated NUSD supply at $226 million and reserves at $233.7 million, implying a 103.6 percent collateralization ratio. It reported that more than 87 percent of these reserves were held through Fireblocks, with smaller amounts on centralized exchanges.
Redemption mechanics for NUSD specify that direct redemptions are limited to KYC or KYB-approved counterparties. Requests exceeding the liquid buffer could enter a queue, targeted for completion within 48 hours but without a guarantee.
On May 25, verification platform Accountable stated its Neutrl dashboard provided continuous cryptographic proof that NUSD reserves matched the protocol's liabilities, preceding the current reserve issues.
NUSD is designed to track the U.S. dollar using yield-bearing crypto assets and market-neutral strategies, rather than relying on deposits held in a traditional bank. The synthetic dollar aims to offer a stable on-chain asset with integrated yield.
Over the past 30 days, NUSD's market capitalization declined 18.4 percent, while monthly transfer volume fell 72.4 percent to $71.4 million. The protocol recorded 615 holders and 347 active addresses over the preceding 30 days.
