A new report from on-chain analytics firm Parsec argues that the recent depegging of Synthetix’s stablecoin sUSD is not the result of bad debt or protocol failure—but a direct consequence of governance upgrade SIP-420.

The stablecoin, which is designed to maintain a $1 price, is currently trading near $0.90. 

According to Parsec’s analysis, this slide began shortly after the implementation of SIP-420, a proposal intended to streamline staking and improve capital efficiency across the Synthetix (SNX) protocol.

SIP-420 introduced a protocol-owned staking pool, replacing the previous system where individual SNX holders minted sUSD and managed their own debt positions. 

Under the new model, stakers delegate to a shared debt pool, enabling a lower collateralization ratio—down from 500% to 200%—and a more simplified user experience. However, it also removed the individual incentive to defend the peg.

“stakers don’t have skin in the game when sUSD trades off peg,” the report noted. “There’s no incentive to buy it cheap and retire debt — because it’s not your debt anymore.”

Influx of funds to the shared pool 

Parsec pointed to a surge of over $80 million in SNX entering the shared pool and a promotional campaign by Infinex as catalysts that significantly expanded sUSD’s supply. Some Curve pools are now composed of over 90% sUSD, with little demand to absorb the excess. Without organic buying pressure, the stablecoin’s price has continued to slip.

The Synthetix team has described the depeg as part of a “transition period” and is working on integrations with Aave and Ethena to create new demand sinks. 

They have also pledged to boost Curve incentives in an effort to support price recovery.

Still, the Parsec report highlights a critical tradeoff: while SIP-420 has enhanced scalability and simplified participation, it has also removed a key reflexive stabilizer that once helped keep sUSD near its intended peg.