MakerDAO Sticks with USDC Reserve Despite Calls for Diversification
Voting members were presented with two options: keep USDC as the primary reserve backing its DAI stablecoin, or diversify
Source: Shutterstock / CryptoFX, modified by Blockworks
MakerDAO members voted against diversifying the primary reserve stablecoin asset backing its DAI token on Thursday, opting to keep Circle’s USDC in place despite breaching all-time lows last week.
In an instant “run-off vote,” where participants rank options in order of preference, more than 93,000 governance tokens, or 79% of the total vote, were cast in favor of maintaining USDC, results from a recent governance poll shows.
It follows a chaotic period in the traditional financial and crypto markets with one of issuer Circle’s main banking partners, Silicon Valley Bank, being taken over by the FDIC. While investor’s nerves have been calmed, the vote was an insurance hedge against further systemic risks.
Circle revealed it had some $3.3 billion trapped within the bank, triggering a 48 hour run on the company’s token which briefly forced prices to as low as $0.87, and also destabilized other stablecoins — DAI among them.
Circle CEO Jeremy Allaire quickly reassured investors it would be able to meet redemptions, stating the company would cover any shortfall incurred using corporate resources.
As a result, DAO members were presented with two options: Further diversify DAI’s stablecoin reserves with Gemini’s GUSD and the Paxos’ USDP as viable candidates, or maintain the status quo.
DAI is designed to hold its peg with the US dollar on a 1:1 ratio through a system of collateralized debt positions. Users can deposit collateral in the form of ETH or other digital assets and mint DAI against it.
MakerDAO introduced its Peg Stability Module in 2020 at a time when the crypto market was experiencing large bouts of volatility. The module allows users to swap between USDC, USDP, GUSD and DAI at no cost.
“Among integrated stablecoins, USDP and GUSD seem to still have somewhat lower fundamental counterparty risk, with greater assurance of the stablecoins being bankruptcy remote and somewhat lower risk within their backing,” MakerDAO said in a forum post.
The first option was considered as a means to “more evenly distribute” its stablecoin reserves and protect against the ‘imminent risk of cascading bank runs and losses on uninsured deposits,” MakerDAO said.
But voters determined that USDC was working just fine, setting aside the serious wobble two weeks ago.
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