Usual Labs Faces Scrutiny After Stealthily Changing Redemption Mechanism for USD0++ Yield-Bearing Staked Token

Stablecoin protocol Usual is facing heat over changes to the 1:1 redemption mechanism for USD0++, its yield-bearing staked token pegged to the USD0 stablecoin.

After new early exit options triggered a sell-off and disrupted its largest Curve pool, USD0++, the staked version of the USD0 stablecoin by Usual, dropped to $0.92 — a whole 8% below its previous redemption value.

USD0++ isn't a stablecoin. Instead, it's a staked version of USD0, designed to lock funds for four years while earning USUAL tokens as rewards. Previously, USD0++ could be redeemed 1:1 with USD0, but now users must choose between two exit options: a conditional exit, redeeming 1:1 but forfeiting part of accrued rewards, or an unconditional exit at a floor price starting at $0.87 and gradually increasing to $1 over four years.

So @usualmoney team has been claiming for a few weeks that USD0++ was redeemable for 1:1 USD0 so everything was chill.

Today, they stopped the 1:1 redeem function without any prior announcement to trap farmers and keep their TVL.

USD0++ is now trading at $0.92. Please send this… pic.twitter.com/aZNArIQoy0

The changes have turned USD0++ into a mix of a bond and a yield farming tool. While high-risk users can stake USD0 into USD0++ to farm USUAL tokens with high yields, more conservative holders can lock funds for four years to earn a fixed 4% annual yield.

In turn, the system's design creates trade-offs. USD0 holders sacrifice yield for stability, while USD0++ holders lock funds and hope USUAL rewards offset their lost yield, and USUAL stakers capture yields from others while betting on the token’s price appreciation.

The recent updates have made USD0++ riskier and less appealing, with long lock-up periods and changing redemption rules making it less attractive than more liquid options, which led to a wave of selling as traders and yield farmers tried to exit, causing the largest Curve pool to become unbalanced and pushing the price of USD0++ below $1.

As of press time, Usual Labs, the company behind the Usual protocol, made no public statements on USD0++’s price changes. In 2024, Usual Labs raised $7 million and secured a $75 million commitment in total value locked for USD0 from investors including IOSG Ventures, Kraken Ventures, GSR, Mantle, Starkware, and Flowdesk, among others.