Foresight reported that Mainstreet, posting through the X account Main Street@Main_St_Finance, issued an update addressing the situation around MSUSD’s depeg and the Mainstreet Morpho market. The post was titled “Mainstreet Update — Morpho, Proof of Reserves & Liquidity.” In the update, Mainstreet said it wanted to provide clarity on the current market situation and placed its central statement at the top: Mainstreet remains fully backed.
The update was posted at 20:33 on June 20, 2026. The X page showed 27,000 views and displayed “Read 23 replies.” Mainstreet said the recent shutdown of its third-party proof-of-reserves dashboard should not be interpreted as a loss of assets or a deterioration in portfolio quality. According to the team, the problem is an infrastructure and reporting issue, not a solvency issue.
Proof-of-reserves outage and the Morpho oracle
Mainstreet said that because the proof-of-reserves dashboard went offline, the oracle supporting the Morpho market is expected to pause within the next 24 hours. The team acknowledged that this has created understandable concern and has triggered higher borrowing rates, as leveraged loopers rush to unwind their positions.
The distinction Mainstreet drew in the update was direct: the failure of the third-party proof-of-reserves dashboard is separate from the state of the assets themselves. The team said the event does not show that assets have been lost, nor does it show that the quality of the portfolio has declined. Its explanation focused on the loss of independent verification and reporting infrastructure, rather than on any impairment of backing.
Alternative reserve verification, liquidity release and last-resort support
Mainstreet said it is responding on several fronts at the same time. First, it is engaging alternative proof-of-reserves providers in order to restore independent verification as quickly as possible. Second, it is continuing to unwind box spread positions and redeploy liquidity into the minter / Morpho ecosystem. Third, if needed, it is preparing to act as a liquidity provider and liquidator of last resort in order to prevent disorderly market conditions.
The team also disclosed that over the past several days it had already unwound its shortest-dated box positions and released free cash. More than $8 million in USDC has already been transferred to the minter, according to Mainstreet, to support liquidity and assist with unwinds. This transfer was presented in the context of rising borrowing rates in the Morpho market and pressure on leveraged positions to exit.
Mainstreet’s update repeatedly links the unwinding of box spread positions with the release of USDC and the broader minter / Morpho ecosystem. In the team’s description, these steps are intended to help the protocol maintain liquidity, assist users or positions that need to unwind, and reduce the risk that market conditions become disorderly during the oracle and reporting disruption.
Box spread portfolio structure and the cost of early exits
Mainstreet said its core portfolio consists primarily of box spreads. It described these as structurally low-volatility positions that are designed to converge to fair value at expiry. For that reason, the team said the portfolio is highly predictable from a net asset value perspective when the positions are held to maturity.
At the same time, Mainstreet emphasized 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. In other words, according to the team’s explanation, being fully backed does not mean that every position can be converted into immediate liquidity at the same price under every market condition.
Mainstreet said the conversion of portfolio positions into immediate liquidity depends on prevailing market depth and the appetite of market makers. For that reason, the team framed its priority as twofold: protect NAV while maximizing liquidity for the protocol. The update did not present immediate liquidation of all positions as the preferred path if doing so would damage NAV beyond the boundaries described by the team.
Insurance fund limits and liquidator-of-last-resort role
Mainstreet said it is willing to accept elevated fees and modest execution costs in order to accelerate the release of liquidity, with support from the protocol insurance fund. However, the team also set a clear limit: it will not realize losses beyond the insurance fund purely to force immediate exits. If market pricing becomes materially irrational, Mainstreet said it will allow positions to continue toward expiry and realize full value at settlement, in line with its risk disclosures and discussions with key partners.
The team also addressed the risk of liquidations in the Morpho market. If borrowing rates continue to rise and liquidations occur, Mainstreet 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, with the stated aim of minimizing bad debt risk.
Weekend liquidity and continued updates
Mainstreet noted that weekend liquidity is currently limited and that market-maker quotes are materially less favorable than during normal trading hours. This has temporarily slowed execution, according to the team. Mainstreet said it expects to have a clearer picture over the coming days and will continue to provide updates as progress is made.
At the end of the statement, Mainstreet said it understands that the situation is stressful and expressed appreciation for the community’s patience and trust. The team reiterated that its commitment remains unchanged: protect user funds, preserve NAV, and restore normal market conditions as quickly and responsibly as possible.