MakerDAO Releases Emergency Proposal to Minimize USDC Exposure

MakerDAO, a worldwide decentralized reserve bank, has recently introduced an emergency proposal. This proposal intends to decrease the platform’s exposure to likely impaired stablecoins like USDC as well as the rest of the risky collaterals. In addition to this, the proposal also endeavours to maintain substantial liquidity preventing DAI (MakerDAO’s native token) from trading considerably above the $1 mark if things change.

MakerDAO Launches an Emergency Proposal to Restrict Exposure to Risky Collaterals

It additionally attempts to guarantee that substantial market liquidity exists for the processing of the likely liquidations of the vaults collateralized by assets. The platform noted in the proposal that a crucial role has been played by a couple of recent events in this respect. It added that the crash of Silvergate as well as Silicon Valley Bank has pushed the entire banking ecosystem into an enormous crisis.

The platform mentioned that, specifically, the centralized stablecoins will potentially experience a huge impairment. As per the platform, the reason behind this deals with their elevated exposures to influenced banking organizations and the rest of the entities that have several risks associated with them. The company disclosed that the FDIC has insured just the initial $250,000 worth of the bank-based deposits. On the other hand, it added, a great number of bank deposits containing stablecoin tokens are unsecured.

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MakerDAO asserted that the FDIC has placed Silicon Valley Bank into receivership with the likelihood of losses due to uninsured investors. It also indicated that the stablecoin issuer Circle’s exposure to SVB is approximately $3.3B out of its cumulative $11B bank-deposit exposure. Along with this, it thinks that some other banking institutions may additionally face risks as the contagion spreads further. According to the platform, the proposed changes would restrict MakerDAO’s exposure to such risky collaterals and try to maintain market liquidity.

The Move Will Permit Swift Governance Actions to Confront Unwanted Governance Proposals

It moved on to say that the governance of the company may intend to make some additional parameter modifications. This would be focused on adapting to the swiftly shifting market scenario in the next few days. It claimed that minimizing the delay in the case of its “governance security module” will permit enhanced agility. As a result of this, rapid governance actions will be taken in line with the requirement to maintain protection and vigilance against likely bad governance proposals.