On March 11, 2023, Makerdao, a decentralized finance project, announced an emergency proposal in response to the USDC depegging incident that caused its stablecoin to drop to $0.877 per unit. As of this writing, Makerdao has requisitioned $3.1 billion in USDC collateral to support the project’s stablecoin, DAI.
Makerdao proposes changes to limit exposure to potentially impaired stablecoins
Makerdao members discuss a recentemergency proposalaimed at addressing the $3.1 billion in USDC assets held by the project as collateral. The news comes after Circle Financial revealedthat funds were being held back at its financial institution, Silicon Valley Bank (SVB), and that its stablecoin, USDC, had broken parity at $1.00. Currently, USDC is trading at $0.91 per coin, but five other stablecoin assets have been affected.
Makerdao’s DAI stablecoin is down to$0.92 per coinand the stablecoin fell to a 24-hour low of $0.881 per DAI.The instability in DAI prompted the Makerdao team to announce an emergency proposal to address its $3.1 billion USDC holdings.
“The proposed changes will maintain sufficient liquidity to prevent DAI from trading significantly above $1 if conditions change, while ensuring sufficient market liquidity to handle potential liquidation of crypto collateral vaults, potentially impaired stablecoins and other risky collateral. The proposal states, “The goal is to limit the manufacturer’s exposure to the
Additionally, Makerdao’s proposal explains that the collateral is “exposed to potential USDC tail risk.” Additionally, Makerdao states that “the proposal(s) to implement the above changes will be posted within the next ~12 hours. “Makerdao urges all voters to consider and support the proposal “as soon as possible.”
This is not the first time Makerdao has had problems with DAI collateral; exactly three years ago, during the March 12 “Black Thursday” event, the falling price of Ethereum (ETH) hurt the stablecoin project. Estimates are that the failed auction left roughly $4 million worth of stablecoin DAI underwater.
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