Stream Finance Collapse Forces Elixir to Retire deUSD Stablecoin
Redemptions Reach 80% as Protocol Halts Operations
DeFi protocol Elixir said it will discontinue its deUSD synthetic dollar following the collapse of its main borrower, Stream Finance. The project processed redemptions for roughly 80% of holders and has taken a snapshot of the remaining balances, which will be redeemable 1:1 for USDC when a claims portal opens.
The decision follows Stream Finance’s suspension of withdrawals on Nov. 4 later than an external fund manager disclosed a $93 million loss. Stream owes at least $285 million to lenders, including over $68 million borrowed from Elixir, which was used to back its own xUSD stablecoin. That token has since collapsed below $0.20, triggering wider market contagion.
Elixir said on X that it has disabled mint and redeem functions to prevent any further liquidation risk before repayments are finalized. “We have taken the snapshot and will ensure all redemptions occur 1:1 in USDC,” the team wrote.
Investor Takeaway
Stream Finance Collapse Exposes DeFi Credit Web
Stream’s losses have rippled through the decentralized credit ecosystem. The platform had borrowed heavily across multiple protocols, using synthetic dollars like deUSD as collateral to support its xUSD issuance. Elixir described itself as Stream’s only creditor with “full redemption rights at $1,” but later said Stream had “decided not to repay or close positions.”
According to Elixir, Stream currently holds about 90% of deUSD’s supply, or $75 million, while Elixir’s own reserves are mostly tied up as a Morpho loan to Stream. “deUSD remains fully backed and Elixir is beginning the process of unwinding its lending position,” the protocol said. “Any affected LPs in AMM pools or lending markets will be able to claim the full value of their position.”
The statement follows mounting criticism of synthetic dollar projects that rely on cross-protocol lending loops to maintain peg stability. The rapid contagion from Stream’s collapse has drawn parallels with the 2022 implosions of Terra’s UST and Iron Finance, though the scale this time remains contained within the DeFi credit niche.
Repayment Plan and Future Steps
Elixir said it is working with decentralized lenders Euler, Morpho, and Compound as well as vault curators to unwind positions and recover funds from Stream. The team plans to distribute recovered assets through a dedicated claims portal. It also said withdrawals from the existing portal were disabled “to remove any risk of Stream liquidating deUSD before repaying their loan.”
The protocol maintains that all deUSD liabilities remain fully backed and that redemptions will be honored in full. Elixir’s communications suggest the team is prioritizing creditor protection over immediate market operations, likely to prevent forced liquidations during ongoing recovery talks.
deUSD, launched in mid-2024, was marketed as a “truly decentralized” synthetic dollar competing with Ethena Labs’ USDe. It gained traction as a collateral asset across DeFi platforms and was even used by Hamilton Lane’s tokenized HLSCOPE fund for backing. The unwind of Stream Finance now appears to have ended that growth story prematurely.
Investor Takeaway
Contagion Spreads Beyond Elixir
Stream projects. Stable Labs’ USDX token has sharply depegged amid exposure to xUSD, and several liquidity pools on decentralized platforms have viewn steep outflows. Market observers warn that while Elixir’s redemption plan may restore user funds, confidence in uncollateralized synthetic stablecoins is eroding.
For now, Elixir’s focus is on ensuring an orderly redemption process. The claims portal, once live, will allow users to redeem remaining deUSD balances directly for USDC. The team has not disclosed an exact launch date but said development is underway.
