Elixir Stablecoin Collapses After Stream Finance Loss

Stream’s $93 million loss caused deUSD to depeg to just 1.5 cents. Elixir revealed that Stream still owes it around $68 million and holds 90% of the remaining deUSD supply. Meanwhile, Circle called on the US Treasury to ensure equal regulatory treatment for banks, nonbanks, and stablecoin issuers as it implements the GENIUS Act. The law was signed in July, and it aims to create a clear framework for payment stablecoins. However, there is still debate over its enforcement details. Coinbase and other industry players also weighed in, and pushed for balanced oversight.

Elixir Halts deUSD Support

Decentralized finance (DeFi) liquidity provider Elixir suspended support for its synthetic stablecoin, deUSD, after the ripple effects of Stream Finance’s $93 million loss earlier this week. The fallout caused deUSD to lose its peg dramatically, plummeting to just 1.5 cents on the dollar, according to CoinGecko data.

Elixir announced on X that it already processed redemptions for 80% of deUSD holders before the depeg occurred. However, the company attributed the collapse primarily to Stream Finance, which it said borrowed deUSD to support its own stablecoin, Staked Stream USD (XUSD). Stream halted withdrawals on Tuesday after revealing that an external fund manager suffered a $93 million loss in net assets, which left the platform with roughly $285 million in debt to multiple lenders. Of that, around $68 million is reportedly owed to Elixir.

The liquidity crisis created severe knock-on effects throughout the DeFi ecosystem. Stream’s XUSD stablecoin, which relied on deUSD as part of its collateral base, fell as low as $0.10 after the losses were disclosed. The incident also severely undermined confidence in synthetic stablecoins, particularly in newer entrants like deUSD, which launched in July of 2024 to compete with Ethena Labs’ USDe. 

Elixir claimed that Stream currently holds about 90% of the remaining deUSD supply, which is worth roughly $75 million. The company also alleged that Stream refused to repay or close its outstanding positions, forcing Elixir to collaborate with other decentralized lending platforms like Euler, Morpho, and Compound to reimburse deUSD holders in full. 

Elixir said it still expects these obligations to be honored “1 for 1,” but confirmed it disabled withdrawals to prevent Stream from liquidating its deUSD holdings before settling the debt. So far, Stream Finance has not commented publicly on the issue. 

Overall, the situation once again brought to attention the fragility of interconnected DeFi systems, where the collapse of a single protocol can cascade through multiple projects and trigger widespread instability.

Circle Pushes Fair Stablecoin Rules

In other stablecoin-related news, Circle urged the US Treasury Department to ensure fair treatment among banks, nonbanks, and stablecoin issuers as officials move forward with implementing the recently signed GENIUS Act. The law was approved in July, and its goal is to establish a comprehensive regulatory framework for payment stablecoins in the United States. The details of its rollout are still being shaped through public consultation.

In a submission that was made Tuesday as part of the Treasury’s notice of proposed rulemaking, Circle reiterated its support for the core principles behind the law, including the requirement that all stablecoins be “fully backed with cash and high-quality liquid assets.” However, the company also placed a lot of emphasis on the importance of consistent enforcement and the need for clear consequences for noncompliance. 

Circle argued that regulatory standards should apply equally across all types of issuers—bank, nonbank, domestic, and foreign—to prevent regulatory arbitrage and to safeguard consumers. The firm explained that a shared supervisory approach with trusted international regulators will help promote competition and maintain market integrity.

Circle’s recommendations were made amid the second round of public comments on how the GENIUS Act should be implemented. Although the law has been enacted, it will not take effect until either 18 months after its passage or 120 days following the approval of its final regulatory framework. 

Other major players in the crypto industry, including Coinbase, also weighed in. Coinbase asked the Treasury to limit the ban on interest-bearing stablecoins to issuers only, allowing exchanges to continue offering such products. This suggestion was made after pushback from traditional banking groups concerned around competition from crypto platforms.

While regulators refine the stablecoin framework, Congress still has a lot of progress to make on the broader digital asset market structure bill. Despite bipartisan discussions in the Senate, the legislation  stalled after a prolonged government shutdown, which is now in its 37th day. Lawmakers are still divided over key provisions, though Republican leaders projected that the market structure bill could still be enacted by 2026.