On March 11, 2023, the Makerdao decentralized finance project issued an emergency proposal following the USDC decoupling incident that caused the stablecoin to drop to $0.877 per unit. As of this writing, Makerdao has a $3.1bn USDC collateral backing a portion of the project’s stablecoin, DAI.
Makerdao Proposes Changes to Limit Exposure to Potentially Impaired Stablecoins
Makerdao members have been discussing a recent emergency proposal which is intended to address the $3.1 billion in USDC assets that the project holds as collateral. The news arrives as Circle Financial revealed it had funds stuck at the financial institution Silicon Valley Bank (SVB) and the company’s stablecoin, USDC, broke its $1 peg. USDC is currently changing hands at $0.91 per coin, but five other stablecoin assets have been affected.
Makerdao’s DAI stablecoin has been reduced to $0.92 per coin, and the stablecoin fell to a 24-hour low at $0.881 per DAI. The unstable DAI 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 damaged stablecoins and other risk collateral, while maintaining sufficient liquidity to prevent DAI from trading significantly above $1 if conditions change and to ensure there is a Adequate market liquidity to process possible liquidations of crypto-collateralized vaults. ”, says the proposal.
Furthermore, the Makerdao proposal explains that the collaterals “are exposed to potential USDC tail risk.” Additionally, Makerdao says that “proposals implementing the above changes are expected to be published in the next 12 hours or less.” Makerdao encourages all voters to review and support the proposals “as soon as possible.”
This is not the first time Makerdao has run into trouble with DAI collateral backing, precisely three years ago, during the “Black Thursday” event on March 12, the falling price of ethereum (ETH) strained the stablecoin project. Estimates indicate that approximately $4 million worth of the DAI stablecoin was left under water due to an auction failure.
What do you think will be the impact of Makerdao’s proposed changes on the decentralized finance space and the stability of stablecoins? Share your thoughts from him in the comments below.
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