Neutrl, issuer of the synthetic dollar NUSD, has temporarily suspended minting, redemptions, and other protocol functions after unspecified circumstances affected protocol reserves. The decision, made on advice of legal counsel, leaves about $53.6 million of NUSD in circulation and prevents approved counterparties from redeeming tokens for backing assets. Neutrl has not identified the affected asset or counterparty, confirmed whether losses were realized, or provided a timeline for restoring operations.
The halt follows a sharp contraction in NUSD supply. Data from RWA.xyz shows supply fell about 76% from the $226 million level documented in February to $53.6 million. Over the latest 30-day period, supply declined 18.4% and monthly transfer volume dropped 72.4% to $71.4 million. Despite the suspension, NUSD traded around $0.9984 on Friday, with 615 holders and 347 active addresses.
Structured-yield protocol Strata responded by pausing minting, redemptions, and related functions for contracts in its Neutrl market, while other Strata markets continued to operate. The pause underscores the redemption risk embedded in NUSD's design, which uses yield-bearing crypto assets and market-neutral strategies rather than cash and short-term government securities. Direct redemptions were already restricted to KYC or KYB-approved counterparties, and larger requests could enter a queue originally targeted for completion within 48 hours without guarantee.
Earlier risk assessments have gained new relevance. In February, risk-advisory team BA Labs estimated NUSD supply at $226 million against $233.7 million in reserves, implying a collateralization ratio of about 103.6%. More than 87% of reserves were held through Fireblocks, with smaller amounts on centralized exchanges, and BA Labs flagged counterparty, operational, and liquidity risks. In May, Accountable said its Neutrl dashboard provided continuous cryptographic proof that reserves matched liabilities, though Neutrl has not said whether the current issue was identified through that system.
The NUSD contraction also coincides with broader stablecoin supply declines. Total stablecoin supply fell by about $10 billion from its May record by July, including a $7.7 billion drop in June to approximately $312 billion, the largest monthly dollar decline since TerraUSD's collapse in May 2022. USDT accounted for roughly $6 billion of the decline from its May level, while USDC had fallen almost $7 billion from its March peak. For NUSD, however, the decline in activity was much steeper: transfer volume fell 72.4% to $71.4 million over the latest month.
