DeFi Fallout: Elixir Terminates deUSD Stablecoin Amidst Stream Finance’s $93M Bad Debt Crisis

The decentralized finance (DeFi) landscape is reeling from the escalating bad debt crisis involving Stream Finance. Multiple lending protocols and stablecoins have been ensnared in the fallout, with liquidity protocol Elixir now forced to terminate its synthetic dollar stablecoin, deUSD, after experiencing a staggering 97% collapse in value. Elixir has announced it has successfully processed redemptions for approximately 80% of deUSD holders and has pledged to fully compensate all remaining token holders.

Stream Finance’s Crisis Unfolds

The genesis of this sudden crisis traces back to Stream Finance’s external fund manager disclosing a substantial $93 million loss. This revelation triggered a severe liquidity crunch within the Stream Finance protocol, culminating in a complete freeze on withdrawals. Reports indicate that Stream Finance faces significant outstanding debt across multiple lenders, with the amount owed to Elixir alone exceeding $68 million.

Elixir has worked tirelessly over the previous 48 hours and has successfully processed redemptions of 80% of all deUSD holders thus far (not including Stream).

As it stands now, Stream holds roughly 90% of the deUSD supply (~$75m), while Elixir holds a similar proportion of its…

— Elixir (@elixir) November 6, 2025

The Rise and Fall of deUSD

Launched in mid-2024, Elixir’s deUSD was designed as a synthetic dollar stablecoin, drawing parallels with Ethena Labs’ USDe. It quickly garnered market attention for its “decentralized, non-custodial” attributes, finding utility as collateral and even being adopted by Hamilton Lane’s tokenized fund, HLSCOPE, as part of its underlying assets.

However, deUSD’s promising trajectory took a sharp turn when Stream Finance extensively borrowed the stablecoin to collateralize its own xUSD stablecoin. The subsequent crisis saw xUSD’s value plummet by over 80% to below $0.2, triggering a ripple effect that devastated other projects, including the collapse of Stable Labs’ USDX. Elixir’s deUSD was not spared, crashing by more than 97% to a mere $0.02.

Elixir’s Decisive Action and Redemption Plan

In response to the escalating crisis, Elixir announced on Thursday the immediate cessation of deUSD minting and redemption mechanisms. Crucially, the team has affirmed its unwavering commitment to a 1:1 exchange rate for USDC, ensuring that all deUSD holders will be fully compensated.

To facilitate this, Elixir has completed a snapshot of all unredeemed deUSD and its staked counterpart, sdeUSD. A dedicated “redemption portal” is set to be launched, providing a streamlined process for remaining users to reclaim their funds. Elixir clarified that the decision to close existing withdrawal channels was a strategic move to prevent Stream Finance from prematurely liquidating its deUSD holdings before settling its outstanding loans, thereby safeguarding against asset mismanagement.

Navigating the Debt Impasse

Elixir previously highlighted its unique position as Stream Finance’s only creditor with “full $1 redemption rights.” Despite this, Stream Finance has reportedly refused to repay the loan or settle its positions, creating a significant challenge for Elixir.

Currently, Stream Finance controls approximately 90% of the total deUSD supply, valued at around $75 million. Coincidentally, a similar proportion of Elixir’s collateral assets are tied up in loans extended to Stream Finance via the Morpho lending platform.

To address this complex debt situation, Elixir has initiated collaborations with prominent lending protocols such as Euler, Morpho, and Compound. The objective is to liquidate Stream Finance’s held positions across these platforms and efficiently distribute the recovered repayments to deUSD holders.

Elixir remains resolute in its commitment, stating, “We still believe we can repay at a 1:1 ratio. deUSD remains fully backed, and we are working with the Stream team to initiate liquidation procedures. Any liquidity providers (LPs) affected in AMM pools or lending markets will be able to recover the full value of their holdings.”