Mainstreet has issued a detailed update addressing the current situation around the Mainstreet Morpho market and concerns linked to MSUSD’s depeg. In the statement, posted by the official Main Street account Main_St_Finance under the title “Mainstreet Update — Morpho, Proof of Reserves & Liquidity,” the team said its most important message is that Mainstreet “remains fully backed.” It stressed that the recent shutdown of its third-party proof-of-reserves dashboard does not reflect any loss of assets or deterioration in portfolio quality.
The team described the issue as one related to infrastructure and reporting, not solvency. According to the post, the dashboard going offline affects independent visibility into reserves, but Mainstreet said that should not be interpreted as evidence that the assets backing the protocol have been impaired. The post was timestamped 20:33 on June 20, 2026, and the page showed 24,000 views as well as “Read 23 replies.”
Proof-of-reserves outage and the Morpho oracle pause
Mainstreet said that because the proof-of-reserves dashboard has gone offline, the oracle supporting the Morpho market is expected to pause within the next 24 hours. The team acknowledged that this development has created understandable concern among users. It also said the situation has triggered elevated borrowing rates as leveraged loopers rush to unwind positions.
In response, Mainstreet said it is acting on several fronts at the same time. It is engaging alternative proof-of-reserves providers in order to restore independent verification as quickly as possible. It is also continuing to unwind box spread positions and redeploy liquidity into the minter and Morpho ecosystem. In addition, the team said it is preparing to act as liquidity provider and liquidator of last resort if that becomes necessary to prevent disorderly market conditions.
Mainstreet disclosed that, over the past several days, it has already unwound its shortest-dated box positions and released free cash. More than $8 million in USDC has already been transferred to the minter to support liquidity and assist with unwinds. This transfer was presented as part of the team’s active response to liquidity pressure around the Morpho market.
Box spreads form the core of the portfolio
Mainstreet explained that its core portfolio consists primarily of box spreads. It characterized these positions as structurally low-volatility strategies designed to converge to fair value at expiry. For that reason, the team said, the positions are highly predictable from a net asset value perspective when they are held until maturity.
At the same time, Mainstreet said that box spreads are not always frictionless to exit early. Selling before expiry can involve transaction fees, wider bid and ask spreads, temporary market-maker discounts, and liquidity-dependent haircuts based on expiry and position size. These frictions do not contradict the team’s claim that the portfolio remains fully backed, but they affect how quickly and at what cost positions can be converted into immediate cash.
The team therefore framed the current challenge as a liquidity conversion issue rather than a backing issue. While assets remain in the portfolio, turning them into immediately available liquidity depends on prevailing market depth and on the appetite of market makers. This distinction is central to Mainstreet’s explanation of why liquidity management has become more complicated after the reporting dashboard shutdown and the expected oracle pause.
Balancing NAV protection with faster liquidity release
Mainstreet said its priority is clear: protect NAV while maximizing liquidity for the protocol. The team said it is willing to accept elevated fees and modest execution costs in order to accelerate liquidity release. It also said those costs would be supported by the protocol insurance fund.
However, Mainstreet also set a limit on how far it is prepared to go. The team said it will not realize losses beyond the insurance fund purely to force immediate exits. If market pricing becomes materially irrational, it said it will allow positions to continue toward expiry and realize full value at settlement. Mainstreet said this approach is consistent with its risk disclosures and with discussions held with key partners.
This means Mainstreet is prepared to use the insurance fund to absorb certain execution costs, but it does not intend to sell assets at prices that would create losses outside that buffer simply for the sake of speed. The stated aim is to keep user funds protected, maintain NAV, and avoid disorderly execution when liquidity is thin or market-maker quotes are unfavorable.
Last-resort liquidation role and weekend liquidity limits
Mainstreet also addressed the risk of further stress in the Morpho market. If borrowing rates continue to rise and liquidations occur, the team said it is prepared to step in as liquidator of last resort. As additional USDC is freed from box maturities and unwinds, part of that capital may be deployed to absorb and liquidate stressed Morpho positions in order to minimize bad debt risk.
The team noted that weekend liquidity is currently limited. It said market-maker quotes are materially less favorable than during normal trading hours, which is temporarily slowing execution. Mainstreet said it expects to have a clearer picture over the coming days and will continue providing updates as progress is made.
In its closing remarks, Mainstreet said it understands that the situation is stressful and expressed appreciation for the community’s patience and trust. It reiterated that its commitment remains unchanged: protect user funds, preserve NAV, and restore normal market conditions as quickly and responsibly as possible.