THORChain Halts BTC and ETH Withdrawals Amid Growing Solvency Concerns

Interblockchain settlements platform THORChain has temporarily paused withdrawals of bitcoin (BTC) and ether (ETH) from its lending and savers programs in response to mounting concerns about potential insolvency risks.

The decision, implemented by network node operators, includes a 90-day freeze and was announced during early Asian hours on Friday, according to updates shared in THORChain’s Telegram channels. The suspension aims to allow the community and developers time to devise a strategy to address outstanding debts and mitigate risks.

THORChain’s lending program currently supports only BTC and ETH, though its saver vaults cater to a wider range of assets. A potential insolvency could occur if all loans and saver positions were simultaneously closed and repaid, particularly if accompanied by a sharp decline in the value of RUNE, the protocol’s native token.

The protocol meets its debt obligations by minting RUNE and selling it into liquidity pools. However, the program stopped accepting new deposits a year ago as concerns about its ability to manage liabilities began to grow within the community.

Community discussions suggest liabilities may total nearly $200 million, with $107 million held in liquidity pools. A sudden withdrawal or sell-off by liquidity providers (LPs) or RUNE holders could exacerbate financial stress on the platform.

Despite these challenges, THORChain’s cross-chain swap services remain unaffected. Users can continue to execute swaps and interact with liquidity pools without any disruptions, ensuring its primary functionality remains intact.