MakerDAO submits 3.1B USDC emergency proposal

According to a forum post published on March 11 by MakerDAO, the issuer of the DAI stablecoin linked to the U.S. dollar, the company sought an “immediate executive proposal to limit risks to the protocol.”

Maker said that it has various collaterals “exposed to USDC tail risk” in light of the unusual de-pegging of the USD Coin stablecoin on March 10.

MakerDAO is now supporting DAI with approximately $3.1 billion worth of USDC as collateral.

Secondly, Maker suggests cutting the debt cap of liquidity provider collaterals UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, and GUNIV3DAIUSDC2-A to 0 DAI.

Maker wishes to cut the daily minting restrictions of its USDC peg stability module from 950 million DAI to 250 million DAI and raise the charge from 0% to 1% to avoid “excessive dumping of USDC.”

If the proposal is approved, the daily minting limit for GUSD would also be cut from 50 million DAI to 10 million DAI.

Maker wishes to erase any exposure to the decentralized financial protocols Curve Finance and Aave.

According to Maker, Curve “uses a fixed $1 pricing for USDC,” which “presents a risk of bad debt accrual and maybe bank runs with cascading market bankruptcy if the market price of USDC falls substantially below the existing collateral factor.”

Even though Aave does not have these dangers, Maker noted that “the total risk-reward of putting assets into the D3M is not attractive under present circumstances.”

Maker suggests raising the debt cap for the Paxos Dollar (USDP) stablecoin issued by the Paxos Trust Corporation from 450 million DAI to 1 billion DAI. 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”

On March 10, USDC decoupled from the U.S. dollar when its issuer, Circle, reported that the stablecoin’s $3.3 billion in collateral funds were trapped at the bankrupt Silicon Valley Bank.

At the time of writing, the USDC exchange rate was $0.9025. In response to the news, the value of the DAI stablecoin has decreased to $0.9235.