THORChain Proposes TCY Equity Tokens to Address $200 Million Debt Crisis

THORChain, a decentralized liquidity protocol, plans to issue a new equity token called Thorchain Yield (TCY) to tackle its $200 million debt crisis, the team said on Sunday.

The new token is part of a community-backed initiative known as “Proposal 6." According to the plan, THORChain intends to distribute TCY tokens to its creditors to convert debt into equity stakes within the network.

The proposal is designed to strengthen THORChain’s financial stability after the recent suspension of its THORFi operations, which was triggered by insolvency concerns.

The Proposal

TCY tokens will be distributed at a rate of 1 TCY per dollar of defaulted debt, allowing creditors to convert their holdings into equity. Additionally, TCY holders will receive 10% of platform fees in perpetuity, paid out daily in THORChain’s native token, RUNE, with payouts pro-rated based on TCY holdings.

The team plans to create a RUNE/TCY liquidity pool with $500,000 in liquidity, priced at $0.10 per TCY. This pool will be funded with $5 million from the treasury, the proposal clarified.

“A Liquidity Pool, seeded by the THORChain treasury, will allow equity token holders to sell their claims at their discretion,” THORChain further explained in a post on X. “As market demand for a share of THORChain’s revenue materializes in the token’s price, holders will have the flexibility to exit on their own terms.”

RUNE Token Reaction

THORChain’s debt crisis has taken a toll on RUNE, which has plunged 37% over the past week amid investor uncertainty. However, following the announcement of THORChain’s plan to issue the TCY equity token, RUNE has rebounded, climbing 11% in the past 24 hours to reach $1.46.

RUNE’s total cryptocurrency market capitalization currently stands at $516 million, according to CoinGecko data.

THORFi Suspension

THORFi’s suspension, announced on Jan. 23, affects THORChain’s Savers and Lending programs and is part of a 90-day restructuring plan designed to address financial challenges associated with these products.

According to the crypto-focused X account TCB, THORChain's insolvency stems from $97 million in outstanding lending obligations and approximately $102 million in liabilities tied to savers and synthetic assets.

A THORChain developer explained that the decision to temporarily pause THORFi was made to protect liquidity providers (LPs) and ensure network stability. However, the developer clarified that swaps would continue to operate as usual.