MakerDAO, the decentralized autonomous organization (DAO) that governs the DAI stablecoin, has voted overwhelmingly to keep USD Coin (USDC) as the primary collateral for DAI. An alternative proposal to “diversify” the collateral into Gemini US Dollar (GUSD) and US Dollar Paxos (USDP) has been rejected by a vote of 20% to 79%, according to the proposal’s official page.
In the proposal published on March 17, MakerDAO’s Central Risk Unit suggested that the risk of a cascading bank run in the US has been reduced, thanks to responses from the US federal government. As a result, the risk of using USDC as collateral “has decreased significantly since last week and no further solvency concerns or depegs are expected at this time.”
However, he also argued that some risks remain. USDC has “potentially riskier exposure to uninsured bank deposits” and “a weaker legal structure” compared to its competitors, GUSD and USDP, the proposal stated.
The Central Risk Unit offered two options to “normalize” the DAI minting standards once the crisis was over. The first option was to split the minting capacity limits between USDC, GUSD and USDP. If this option were chosen, the fee for converting USDC to DAI would drop from 1% to 0.05% immediately, but would not drop to zero until a later date.
The Central Risk Unit stated that this first option would “more evenly distribute the Maker PSM stablecoin reserves among various assets”, reducing the risks of a USDC depreciation.
The second option was to increase the minting capacity of USDC to DAI from the current 250 million to 450 million and reduce the commission to 0%. In this case, DAI’s mintage standards would move “closer to their previous state,” causing DAI to “continue to have excessive exposure to USDC,” he said.
MKR holders overwhelmingly approved the second option, with 79.02% voting in favor compared to 20.69% for the first. Less than 1% (0.29%) voted to reject both options and 0.15 MKR votes (around 0%) were used to abstain.
Following a wave of bank failures, the USDC stablecoin lost its $1 peg on March 11, briefly dipping below $0.90 per coin. In response, MakerDAO implemented extraordinary measures aimed at preventing arbitrageurs from dumping their coins into the protocol and causing DAI to become undercollateralized. The fee to mint DAI using USDC as collateral was raised from 0% to 1%, and the daily minting limit for this process was lowered from 950 million DAI to 250 million DAI.
However, on March 13, the USDC recovered its one-dollar value, reaching $0.9987. However, the extraordinary measures were still in force since March 23, before the approval of this proposal.
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