MakerDAO’s co-founder Rune Christensen proposed the DAO dump all its USDC–about $3.5B price. Christensen desires to purchase ETH with the funds.
MakerDAO is the decentralized group behind DAI, an over-collateralized stablecoin pegged to the US Greenback with a $7.3B market cap. Earlier this week, the DAO’s co-founder Rune Christensen proposed MakerDAO dump all of the USDC from its treasury–about $3.5B price. Christensen desires to purchase ETH with the funds.
In April, Do Kwon declared war on MakerDAO, threatening to de-peg its DAI token and unseat Curve’s 3pool. In the present day, Do Kwon is a joke and MakerDAO has proposed to de-peg the DAI token by itself.
Twister Money Sanctions Put USDC at Danger
US Treasury sanctions towards Twister Money led to frozen accounts throughout the Ethereum ecosystem, together with USDC. In response to the sanctions, USDC’s dad or mum firm Circle froze a small quantity of USDC that was linked to Twister Money in compliance with the US Financial institution Secrecy Act. That is scary for tasks holding giant quantities of USDC, because it’s exhausting to regulate whether or not tainted crypto enters the undertaking’s pockets.
Since MakerDAO and DAI are decentralized, and USDC is topic to US finance laws, Christensen believes DAI would profit from MakerDAO dumping its USDC and utilizing ETH to again DAI. Roughly half of DAI’s reserves are held in USDC. Meaning, in a roundabout means, that the US authorities can freeze half of DAI’s reserves. Naturally, this places DAI’s peg to the US Greenback in danger.
To De-Peg or To not De-Peg?
Is it extra essential for DAI to remain pegged to the US Greenback or for MakerDAO to guard DAI’s reserves from US sanctions? Clearly, MakerDAO cannot maintain $3.5B in USDT, since Tether has its own problems. Any stablecoin that complies with the US authorities’s monetary laws goes to be too dangerous to make use of to again DAI.
However with out its peg to the US Greenback, how will DAI keep in Curve’s 3pool? The 3pool is a stablecoin pool containing ~$1B of DAI, USDC, and USDT that’s used all through the Ethereum DeFi ecosystem for its deep liquidity. With out inclusion within the 3pool and a peg to the US Greenback, will buyers wish to use or maintain DAI?
Regardless of years of success, it looks like MakerDAO has been struggling to again DAI for ages, together with loans to companies like Tesla and purchases of actual property. MakerDAO will seemingly come out effective, however this proposal reveals how tough it’s to function a significant DeFi undertaking now that the US has sanctioned Twister Money.
