The DeFi protocol Usual has made a big change to its USD0++ token, and it’s causing quite a stir. On January 10, 2025, they lowered the fixed price of USD0++ from $0.995 to $0.87.

Usual Labs, the company behind this stablecoin, says they planned this change since October. But many investors and developers weren’t ready for it. They felt blindsided.

On Usual’s Discord server, which is popular in the crypto community, users expressed their frustration. One user even said, “The fact that there is chaos in the market surely lets you know that you guys have messed up here. How are you guys not taking any responsibility?” Usual Labs hasn’t responded to requests for comment yet.

Before this change, many DeFi apps treated USD0 and USD0++ as equal. They allowed users to swap them one-to-one. Now, that’s not the case, and developers are scrambling to make adjustments.

Pendle, another protocol that lets users split assets, might see some losses. After the price drop, the value of USD0++ principal tokens has declined. Investors had staked USD0++ thinking they could exchange it for USD0 at a one-to-one ratio, which is pegged to the U.S. dollar.

Now, with the new price, USD0++ can only be redeemed for $0.87. Holders will have to wait until 2028 for the bond token to mature if they want the full value.

So, how does USD0 work? It’s a token pegged to the dollar, backed one-to-one by real assets like short-term U.S. Treasury bills. Users can stake USD0 and convert it to USD0++. This staked version is locked for four years and earns yield paid out in the protocol’s native token, USUAL.

Before the changes, Usual’s documentation stated that USD0++ holders could exchange their tokens for USD0 at a rate below one-to-one. After the changes, they updated the documentation to show the new $0.87 floor for redemptions. Earlier versions didn’t mention that this floor would be fixed at $0.87 in the future.

For those USD0++ holders who weren’t aware of the change, there may be a bit of good news. Noé Giglio, the community lead, confirmed that a conditional exit allowing users to exchange USD0++ for USD0 at a one-to-one ratio will go live early next week. However, this redemption means users will have to give up some of the yields they earned on their USD0++ holdings.

It’s still unclear if those who choose to hold onto their USD0++ tokens will ever see a profit, even when they mature. Stani Kulechov, founder of the well-known DeFi lending protocol Aave, shared his thoughts on Telegram. He said, “This is a very tricky situation. If USD0++ is treated like a zero-coupon bond, it means the position will be underwater—essentially bad debt in disguise—forever. Even after four years, borrowers might face such high costs that they just dump their positions as unprofitable and never repay.”

Tim Craig is the DeFi Correspondent for DL News, based in Edinburgh. Feel free to reach out with tips!