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On March 11, 2023, the decentralized finance project Makerdao issued an emergency proposal following the USDC depegging incident that caused the stablecoin to fall to $0.877 per unit. At the time of writing, Makerdao has $3.1 billion in USDC collateral backing part of the project’s stablecoin, DAI.
Members of Makerdao have discussed a recent crisis proposal aimed at addressing the $3.1 billion in USDC assets the project holds as collateral. The news comes as Circle Financial revealed it had funds stuck in financial institution Silicon Valley Bank (SVB) and the firm’s stablecoin, USDC, broke the $1 parity. Currently, 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 fell to a 24-hour low of $0.881 per DAI. DAI’s erratic activity has prompted the Makerdao team to issue an emergency proposal to raise the $3.1 billion in USDC it holds.
“The proposed changes are intended to limit Maker’s exposure to potentially weakened stablecoins and other risky securities, while maintaining enough liquidity to prevent DAI from trading significantly above $1 if conditions change, and ensuring that there is sufficient market liquidity to process potential liquidations of crypto-secured vaults,” the proposal states.
Furthermore, the Makerdao proposal explains that the securities “are subject to potential USDC tail risk.” Additionally, Makerdao says that “the proposals implementing the above changes are expected to be posted 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 had problems with DAI’s collateral, as exactly three years ago, during the “Black Thursday” event on March 12, the collapsing price of ethereum (ETH) charged the stablecoin project. Estimates indicate that around $4 million worth of stablecoin DAI was left underwater due to an auction error.
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.
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