Maker DAO files emergency proposal addressing 3.1B USDC exposure

According to a March 11 post on the forums of Maker DAO, the issuer of the USD-pegged DAI stablecoin: I was demanded to “Urgent Executive Proposal to Reduce Risk to Protocol”. Maker said it holds multiple collateral that is “exposed to USDC tail risk” in light of the unusual de-pegging of the USD Coin (USDC) stablecoin that began March 10.Maker DAO Currently OwnIt holds over 3.1 billion USDC as collateral backing the DAI stablecoin.

First, Maker is proposing to reduce the debt limit of UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, and GUNIV3DAIUSDC2-A Liquidity Provider Collateral to 0 DAI. Maker then lowered his daily issuance limit on the USDC pegged stability module from 950 million DAI to 250 million DAI, and raised the fee from 0% to 1%, declaring “USDC’s excessive We want to prevent “dumping”. Another stablecoin module, GUSD, will also have its daily issuance cap lowered from his 50 million DAI to 10 million DAI if the proposal is passed.

Maker also wants to completely eliminate exposure to decentralized financial protocols Curve and Aave. According to Maker, Curve “uses a fixed price of $1 for USDC,” so “if the market price of USDC drops significantly below the current collateral factor, bad debts will emerge and a chain of market bankruptcies will follow.” There is a possibility that there will be a risk of unexpected occurrence.” Aave does not have such risks, but Maker said, “In the current situation, the overall risk and reward of depositing funds on D3M is unfavorable.”

Finally, Maker is proposing to raise the protocol debt ceiling for Paxos-issued USDP stablecoins from 450 million DAI to 1 billion DAI. The company wrote:

“Paxos has relatively stronger reserve assets than other centralized stablecoins available, consisting primarily of U.S. Treasury securities, reverse repurchase agreements collateralized by U.S. Treasury bonds. It faces relatively low impairment potential compared to other available stablecoins.”

On March 10, the USDC announced that its issuer, Circle, had $3.3 billion worth of funds backing stablecoins pegged to the now-defunct Silicon Valley Bank. , lifted the peg from the US dollar. At the time of issue, USDC is currently trading at $0.9025. In light of this news, the DAI stablecoin also dropped to his $0.9235.