In response to the MSUSD depegging issue, Mainstreet posted on X stating that while market concerns have arisen regarding the Morpho market, proof of reserves, and liquidity, the asset remains fully backed, and the issues are not due to asset losses or insolvency. Mainstreet explained that the oracle supporting the Morpho market is expected to pause within the next 24 hours due to the offline status of the proof of reserves service, which has triggered market anxiety and accelerated position unwinding by leveraged circular borrowing users, leading to a notable rise in borrowing rates. From a net asset value (NAV) perspective, its core portfolio remains highly secure; however, challenges include increased transaction fees, wider bid-ask spreads, market maker discounts, and liquidity discounts based on maturity and position size. Mainstreet added that it is currently implementing multiple measures, including integrating a new proof of reserves provider to restore independent verification as soon as possible, reallocating liquidity back into the minter/Morpho ecosystem, and stepping in as a last-resort liquidity provider and liquidator if necessary to prevent disorderly market movements. The primary objective is to protect NAV and maximize protocol liquidity. Should borrowing rates continue to rise and trigger liquidations, Mainstreet is prepared to act as the “last liquidator” to mitigate default risk. However, as it is currently the weekend and market liquidity is limited, market maker quotes are weaker than during normal trading hours, temporarily slowing asset exit speeds. Further clarity is expected over the coming days.
Mainstreet Addresses MSUSD Depeg: New Reserve Proof Service to Be Integrated
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Summary
Mainstreet addressed the MSUSD depeg, confirming the stablecoin is fully backed and not due to asset losses. The reserve proof service is offline, causing the Morpho oracle to pause within 24 hours. Borrowing rates have risen as leveraged users exit. The firm is integrating a new reserve proof provider to restore verification, redeploy liquidity, and act as a final liquidity provider if needed. The Federal Reserve has yet to comment on the situation, while new token listings continue to draw attention from traders.
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