MakerDAO files emergency proposal addressing 3.1B USDC exposure

Based on a discussion board submit from MakerDAO, the issuer of the U.S. dollar-pegged DAI (DAI) stablecoin, on March 11, the agency requested an “pressing govt proposal to mitigate dangers to the protocol.“ Maker stated it possessed a number of collaterals “uncovered to USDC tail threat” in gentle of the extraordinary depegging of the USD Coin (USDC) stablecoin that started on March 10. MakerDAO at present has over $3.1 billion price of USDC in collateral backing DAI.

Firstly, Maker proposes lowering the debt ceiling of UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A and GUNIV3DAIUSDC2-A liquidity supplier collaterals to 0 DAI. Subsequent, Maker desires to scale back the each day minting limits of its USDC peg stability module from 950 million DAI to 250 million DAI, and improve the charge from 0% to 1% to stop “extreme dumping of USDC.“ One other stablecoin module, GUSD, may even see its each day minting restrict diminished from 50 million DAI to 10 million DAI if the proposal passes.

Maker additionally desires to get rid of publicity to decentralized finance protocols Curve Finance and Aave totally. Based on Maker, Curve “makes use of a hard and fast $1 worth for USDC,“ which “presents a threat of unhealthy debt accrual and doubtlessly financial institution runs with cascading market insolvency if the market worth of USDC falls considerably beneath the present collateral issue.“ Whereas Aave doesn’t possess such dangers, Maker however acknowledged that its “general risk-reward of depositing funds into the D3M aren’t favorable beneath present circumstances.“

Lastly, Maker proposes growing the protocol’s debt ceiling for the Paxos Greenback (USDP) stablecoin issued by the Paxos Belief Firm from 450 million DAI to 1 billion. The agency wrote:

“Paxos has comparatively stronger reserve property versus different out there centralized stablecoins, consisting primarily of U.S. treasury payments, reverse repurchase agreements collateralized by U.S. treasury bonds. They face comparatively decrease potential for impairment versus different out there stablecoins”

On March 10, USDC depegged from the U.S. greenback after its issuer, Circle, disclosed it had $3.3 billion price of funds collateralizing the stablecoin caught in now-defunct Silicon Valley Financial institution. On the time of publication, USDC is at present buying and selling at $0.9025. In gentle of the information, the DAI stablecoin has additionally degged to $0.9235.