A decentralized finance protocol has frozen user withdrawals and deposits after an external manager revealed a $93 million loss, causing its main token to plummet and heightening concerns about the volatile digital asset sector.
Stream Finance confirmed this week that it suspended all transactions on its platform. The company stated on the social media platform X that “until we can fully assess the extent and causes of the loss, all withdrawals and deposits will be temporarily suspended.”
The incident led to an immediate market reaction. The Stream Finance token, xUSD, lost its peg to the U.S. dollar and plummeted approximately 70% to trade around $0.33 in early Tuesday trading, according to data from CoinGecko.
Stream Finance has not publicly disclosed the exact cause of the loss. Details such as potential hacking, operational errors, or poor investment decisions remain unrevealed.
The company has engaged the law firm Perkins Coie LLP to lead an investigation into the matter. Attorneys Keith Miller and Joseph Cutler, specializing in cryptocurrency cases, compliance, and cybersecurity, will guide the inquiry.
Stream Finance said its decision to retain the firm “reflects the unwavering commitment of Stream to transparency and sound corporate governance.” The protocol operates in the decentralized finance ecosystem with tokens including Staked Stream USD (xUSD), xBTC, and xETH.
The firm is now working to withdraw all remaining liquid assets, a process it expects to complete shortly. Any pending deposits will not be processed during this period.
The security firm PeckShield issued an alert on X earlier this week regarding xUSD’s de-pegging, warning users of potential risks.
The xUSD token is widely used as collateral on various lending platforms like Euler, Morpho, and Silo, across networks such as Plasma, Arbitrum, and Plume. An anonymous analyst known as YAM estimated that outstanding loans and debts backed by Stream-related collateral exceed $280 million. This figure does not include indirect exposures.
Stream Finance has pledged to provide regular updates as its investigation proceeds. The company aims to restore user confidence and reiterated its commitment to “transparency and robust governance” on X.
This incident occurs amid ongoing volatility in the cryptocurrency market. Decentralized finance protocols, in particular, have faced increased scrutiny from regulators and security experts regarding their stability and operational risks.