- The issuer of USDR, a real estate-backed stablecoin that recently lost nearly 50% of its value, is implementing a redemption process to restore value to users
- The stablecoin’s challenges highlight the risks associated with cryptocurrencies backed by real-world assets, as it struggled due to the depletion of DAI reserves.
- Tangible, the company behind USDR, plans to liquidate assets and launch tokenized real estate “Baskets” as part of its redemption process
The issuer of the struggling real estate-backed stablecoin USDR, which has dropped almost 50% in value recently, is taking steps to address the situation. Michael Slatkin, the head of marketing for USDR’s issuer Tangible, announced plans for a redemption process to restore the value for users after the supposed stablecoin plummeted from its $1 peg yesterday to around half that due to the depletion of DAI reserves. USDR holders will have the opportunity to redeem their devalued tokens for a mixture of cryptocurrency assets, including those tied to real estate in the UK. Just how much of their lost value users will get back via this process, which could take months to play out, remains uncertain.
USDR Fell 50%
USDR’s recent troubles are a prominent example of the challenges faced by cryptocurrencies that use real-world assets (RWA) to back their tokens. This niche sector seeks innovative ways to tokenize conventional investments like real estate and treasuries, with USDR being backed by a blend of digital currencies and tangible real estate assets.
The stablecoin, which should always remain pegged to the US dollar, suddenly lost almost 50% of its value yesterday, currently sitting at around $0.53 and showing no sign of buoyancy. Tangible revealed yesterday what had caused the collapse:
Over a short period of time, all of the liquid DAI from the treasury was redeemed. This led to an accelerated drawdown in the market cap. Combined with the lack of DAI for redemptions, and liquidation timeline on real estate, panic selling ensued, causing a depeg. This lead [sic] to an accelerated drawdown in the market cap. Combined with the lack of DAI for redemptions, panic selling ensued, causing a depeg.
While USDR’s real estate investments offered investors yields as high as 16%, its risk profile became evident during this crisis. In contrast to stablecoins like Circle’s USDC, which prioritize safety with highly liquid short-term Treasury bonds, USDR relied on more speculative and less liquid real estate assets that couldn’t be quickly liquidated to meet the sudden withdrawal conditions that occurred.
Baskets, NFTs, and More On the Horizon
In a lengthy X post yesterday, Tangible revealed how it will “make users whole”. The company will liquidate Protocol Owned Liquidity (POL) and insurance fund assets to support USDR’s stability, making the proceeds available to customers during the redemption process. Additionally, Tangible is preparing to launch “Baskets,” which are pools of tokenized real estate assets backed by tangible real estate the company still owns. These assets will provide users with options to hold them, generate yield, or exchange them, forming a crucial component of the USDR redemption process.
Once Baskets are deployed, Tangible will open USDR redemptions, enabling users to exchange their USDR tokens for a mix of stablecoins, Basket tokens, and locked TNGBL 3,3+ NFTs. They will also address potential collateralization gaps by using TNGBL 3,3+ tokens at market prices, locked for a year. This comprehensive approach aims to provide viable solutions for USDR holders while ensuring transparency and financial stability for their crypto assets.
Tangible Bemoans “Attack Vectors”
Tangible added that the company’s future “will not include Real USD,” and gave a brief explanation as to how the USDR stablecoin had failed so spectacularly:
We tried something novel with Real USD, but there were too many attack vectors in the design. Elements put in place to protect the customer were too easily manipulated to attack the protocol. We can protect our users at the current size, but as we continued scaling it may have become impossible. Our primary goal is always to protect users, that’s why we created a stablecoin backed by real world assets in the first place.
Tangible added that it plans to keep building and won’t let the USDR collapse be a decisive setback.
