THORChain restructures $200M debt into equity tokens

THORChain's (CRYPTO:RUNE) node operators have approved a proposal to address the platform's liquidity challenges by converting $200 million in defaulted debt into equity tokens.

On January 23, THORChain halted its lending and savings programs for Bitcoin (CRYPTO:BTC) and Ether (CRYPTOLETH) to prevent an insolvency crisis.

This suspension gave the community a 90-day window to develop a restructuring strategy aimed at stabilising operations and compensating affected users.

The approved proposal, announced on February 2, involves minting 200 million new tokens called "TCY," each representing $1 of the platform's debt.

Affected users will receive TCY tokens as airdrops, with one TCY issued for every dollar owed.

These tokens will entitle holders to 10% of THORChain's network revenue indefinitely, with payouts made in RUNE (THORChain’s native token) every 24 hours.

Aaluxx Myth, the pseudonymous author of the proposal, described the arrangement as offering liquidity providers potential upside while allowing risk-averse users to liquidate their earnings daily.

THORChain also plans to create a liquidity pool to facilitate the sale of these claims based on market demand, giving creditors the ability to exit as token values fluctuate.

However, concerns have arisen within the community about the long-term viability of the plan.

Some members are sceptical about its complexity and whether it will require further investment and trust in THORChain, especially given the platform's history of financial management issues.

Additionally, there are questions about whether the new TCY tokens could be classified as unregistered securities, which could lead to potential legal challenges for THORChain.

At the time of reporting, the THORChain (RUNE) price was $1.41.