DeFi Protocol Stream Finance Halts Withdrawals, Reports $93M Loss, xUSD Depegs

Key Takeaways:

• Stream Finance has suspended all withdrawals and deposits following a reported $93 million loss.
• The loss was disclosed by an external fund manager overseeing part of Stream’s portfolio.
• Law firm Perkins Coie has been appointed to investigate the incident.
• Stream’s stablecoin, Staked Stream USD (xUSD), has sharply depegged to around $0.50.

Stream Finance Suspends All User Activity

Decentralized finance protocol Stream Finance has temporarily frozen all user withdrawals and deposits after one of its external fund managers reported a significant loss totaling approximately $93 million. The company announced the suspension late Monday on X (formerly Twitter), saying the decision was made to protect user funds and allow time to assess the situation.

In its statement, Stream said it is in the process of withdrawing all remaining liquid assets held under external management and expects to complete the retrieval soon. “Until we are able to fully assess the scope and causes of the loss, all withdrawals and deposits will be temporarily suspended,” the company wrote, noting that pending deposits will not be processed during this period.

The protocol assured users that updates will be shared periodically as the investigation unfolds and encouraged patience while the internal and external reviews are conducted.

Legal Team to Lead Investigation

To determine how the loss occurred and who may be responsible, Stream Finance has engaged the services of law firm Perkins Coie LLP. The investigation will be led by partners Keith Miller and Joseph Cutler, both of whom have extensive experience advising fintech and blockchain firms on regulatory compliance, cybersecurity, and digital asset management.

The move is seen as a step toward restoring user confidence after what appears to be one of the largest reported losses involving a DeFi protocol’s external fund manager this year. Stream stated that the legal team will oversee a “comprehensive review” to identify the underlying causes of the incident and outline steps toward remediation.

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Stablecoin xUSD Loses Its Peg

Shortly before Stream’s announcement, blockchain security firm PeckShield flagged that Stream’s associated stablecoin, Staked Stream USD (xUSD), had lost its peg to the U.S. dollar. According to data from CoinGecko, xUSD plunged to as low as $0.53 early Tuesday morning, far below its intended $1 value.

The depegging suggests that investor confidence in Stream’s ecosystem has been severely shaken. Analysts noted that liquidity concerns and uncertainty around the recovery of funds have likely contributed to the sharp decline.

Market Impact and Next Steps

The event has sparked a broader discussion in the DeFi community about the risks of entrusting decentralized protocols with off-chain asset management. External fund managers are often used to enhance yield strategies, but incidents like this highlight the vulnerability such arrangements can introduce.

Stream Finance has not yet specified when normal operations will resume. Users are advised to monitor official announcements and avoid attempting new transactions until the platform confirms stability.

While the full impact remains unclear, the coming days will be crucial for Stream Finance as it seeks to recover assets, stabilize its ecosystem, and regain user trust.

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