MakerDAO, the issuer of the U.S. dollar-pegged DAI stablecoin, asked for a “immediate executive proposal to limit threats to the protocol.”
MakerDAO said it had numerous collaterals “exposed to USDC tail risk” in light of the unprecedented depegging of the USD Coin (USDC $0.92) stablecoin that began on March 10.
DAI is now secured by MakerDAO with USDC collateral valued at over $3.1 billion. First, MakerDAO suggests setting a debt ceiling of 0 DAI for the liquidity provider collaterals UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, and GUNIV3DAIUSDC2-A.
Maker then wants to raise the charge from 0% to 1% and lower the daily minting restrictions of its USDC peg stability module from 950 million DAI to 250 million DAI in order to stop “excessive dumping of USDC.”
If the proposal is approved, the daily minting cap for GUSD, another stablecoin module, will be lowered from 50 million DAI to 10 million DAI. Also, MakerDAO intends to completely cut off exposure to the decentralized financial protocols Curve Finance and Aave.
Maker claims that because Curve “uses a fixed $1 price for USDC,” there is a risk of bad debt accumulation and potential bank runs with cascading market insolvency if the market price of USDC declines sufficiently from the existing collateral factor.
Even though Aave doesn’t have these dangers, Maker nevertheless said that the “overall risk-reward of depositing funds into the D3M are not favorable under current conditions”.
Finally, Maker suggests raising the protocol’s debt ceiling from 450 million DAI to 1 billion for the Paxos Dollar (USDP) stablecoin issued by the Paxos Trust Corporation. The company wrote:
“Paxos has relatively stronger reserve assets versus other available centralized stablecoins, consisting primarily of U.S. treasury bills, reverse repurchase agreements collateralized by U.S. treasury bonds. They face relatively lower potential for impairment versus other available stablecoins”
Since its issuer, Circle, claimed it had $3.3 billion in funds collateralizing the stablecoin stranded in the long-gone Silicon Valley Bank, USDC decoupled from the dollar on March 10. The DAI stablecoin has likewise degged to $0.9235 in response to the announcement.
