Makerdao Issues Emergency Proposal to Address $3.1B in USDC Collateral After Stablecoin Depegging Incident
On March 11, 2023, the decentralized finance project Makerdao issued an emergency proposal following the USDC depegging incident that saw the stablecoin dip down to $0.877 per unit. At the time of writing, Makerdao commands $3.1 billion in USDC collateral that backs a portion of the project’s stablecoin, DAI.
Makerdao Proposes Changes to Limit Exposure to Potentially Impaired Stablecoins
Members of Makerdao have been discussing a recent emergency proposal that aims to address the $3.1 billion in USDC assets the project holds as collateral. The news comes as Circle Financial revealed it had funds stuck at the financial institution Silicon Valley Bank (SVB) and the firm’s stablecoin, USDC, broke its $1 parity. Presently, USDC is changing hands for $0.91 per coin, but five other stablecoin assets have been affected.
Makerdao’s DAI stablecoin is down to $0.92 per coin, and the stablecoin slipped to a 24-hour low at $0.881 per DAI. DAI’s unstable activity has caused the Makerdao team to issue an emergency proposal to address the $3.1 billion in USDC it holds.
“The proposed changes are intended to limit Maker’s exposure to potentially impaired stablecoins and other risky collateral while maintaining enough liquidity to prevent DAI from trading significantly above $1 if conditions change and ensuring there is adequate market liquidity to process potential liquidations of crypto-collateralized vaults,” the proposal states.
Further, the Makerdao proposal explains the collaterals “are exposed to potential USDC tail risk.” Additionally, Makerdao says the “proposal(s) implementing the above changes are expected to be posted in the next ~12 hours or less.” Makerdao is encouraging all voters to review and support the proposals “as soon as possible.”
This isn’t the first time Makerdao has had issues with DAI’s collateral backing as precisely three years ago, during the March 12 “Black Thursday” event, the depleting price of ethereum (ETH) strained the stablecoin project. Estimates indicate that roughly $4 million worth of the stablecoin DAI was left underwater due to an auction failure.
What do you think the impact of Makerdao’s proposed changes will be on the decentralized finance space and the stability of stablecoins? Share your thoughts in the comments below.