The Liquid Network, a federated sidechain managed by Blockstream, has suspended peg-outs, preventing users from converting L-BTC back into Bitcoin. This measure remains in effect as of October 11, 2026, due to a shortfall in the network's reserve.
The issue originated on September 6, 2026, when a bug in the Elements software allowed unauthorized creation and redemption of L-BTC. During the incident, between 3,996 and 4,000 BTC were removed from the reserve, which previously held approximately 4,205 BTC.
White-hat actors returned about 3,400 BTC by September 7, leaving a deficit of 598 to 603 BTC. As of mid-September, the reserve covered roughly 86% of the outstanding L-BTC supply. Blockstream CEO Adam Back stated that the 1:1 peg will be restored.
While block production and internal L-BTC transactions resumed on September 10, 2026, redemptions will remain frozen until the reserve is fully backed and security reviews are completed. Other assets on the network, such as USDT, remain unaffected.
