DeFi protocol Stream Finance has halted all deposits and withdrawals after a major loss.
Summary
- Stream Finance has suspended all deposits and withdrawals until further notice after the third-party fund manager reported a $93 million loss.
- The company has retained Perkins Coie LLP, a leading blockchain law firm, to lead the investigation.
- Stream’s stablecoin XUSD has lost its peg, trading around $0.50 and causing widespread concern.
- Analysts estimate that total debt exposure, including lenders and users, could exceed $280 million.
Decentralized finance platform Stream Finance has suspended deposits and withdrawals after a $93 million loss, raising concerns within the DeFi community and prompting a formal investigation.
The protocol, known for offering capital-efficient strategies by combining traditional financial instruments with DeFi innovation, revealed via As a result, Stream Finance has engaged blockchain-focused law firm Perkins Coie LLP to lead a comprehensive investigation into the incident.
Stream stated that attorneys Keith Miller and Joseph Cutler will oversee the investigation, which reflects the company’s emphasis on transparency and governance. The team is also in the process of withdrawing all cash and has promised to keep stakeholders informed of any new developments.
“Until we can fully assess the extent and causes of the loss, all withdrawals and deposits will be temporarily suspended. Any outstanding deposits will not be processed at this time,” Stream Finance added.
The platform’s native stablecoin, StakedStreamUSD (XUSD), lost its position in the wake of the revelation, falling to around $0.50, adding to users’ concerns. The depegging has not only affected XUSD holders, but also other synthetic tokens under the Stream umbrella, such as xBTC and xETH.
Market participants and investors who rely on the protocol for trading and long-term investing have expressed concern that the sudden freeze will leave them without access to their assets.
Stream Finance’s estimated debt was $280 million
A pseudonymous analyst known as YAM marked that the situation could have far-reaching consequences. He noted the complexity in settling claims between holders of xUSD, xBTC, xETH and the lenders backed by these tokens. Furthermore, he warned against indirect exposure to the event through other stablecoin vaults such as Elixir’s deUSD and Treeve’s scUSD.
YAM estimated that total outstanding debt associated with Stream assets could exceed $280 million, excluding exposure through interconnected lending platforms. Potentially affected protocols include Euler, Morpho, and Silo, all of which have lending markets tied to Stream tokens.
Stream Finance launched in early 2024 with a mission to provide yield-generating DeFi services through activities such as credit arbitrage, hedged market making and incentive farming. Users typically deposited USDC in exchange for XUSD, which was designed to provide stable returns.
With the future of the protocol uncertain, attention is turning to the outcome of the study and whether affected users will be compensated. The incident comes after the recent $116 million tax on the Balancer protocol and highlights the risks inherent in complex DeFi systems and could reignite debates over oversight, third-party fund managers and protocol transparency in crypto finance.
