Following Circle’s freeze of blacklisted Twister Money addresses, MakerDAO is re-assessing the dangers related to its USDC collateral.
On August 8, issuers of USDC stablecoin Circle froze USDC tokens belonging to 38 pockets addresses blacklisted by the U.S. Treasury Division. One of many wallets was recognized as a DAI Twister pool. In consequence, there have been considerations from the MakerDAO group about their publicity to USDC and the chance of being hunted by regulators.
Pricey @MakerDAO $DAI group… it is best to begin unwinding your USDC collateral instantly, changing it into stables which are extra censorship resistant.
You may have a while to do it, however you must get began.
— Erik Voorhees (@ErikVoorhees) August 8, 2022
In response, the group has been actively engaged in deep discussions through the Discord channel on the best way ahead.
DAI’s publicity to USDC and sanction threat
DAI’s market capitalization of $7.5 billion makes it the biggest DeFi protocol by whole worth locked. It’s presently collateralized by 33.9% USDC, 23.2% ETH, and seven.6% WBTC, amongst different belongings. With $3.56 billion USDC locked within the Maker protocol, USDC represents the biggest supply of collateral.
The sustainability of DAI is beneath query as it’s closely backed by collateral that regulators can censor. MakerDAO delegate Chris Blec believes it may result in a sanction on DAI
“Good luck not getting sanctioned when DAI is already sitting in sanctioned good contracts that may’t be paused,” Blec added.
One other challenge brewing locally considerations Maker’s Peg Stability Module (PSM). The PSM permits customers to swap a given collateral kind straight for DAI at a hard and fast fee. In the mean time, Maker’s USDC PSM contract holds 3.56 billion USDC.
Since some DAI customers interacted with Twister Money by means of the USDC PSM, the contract might be implicated within the case of a probe. If a sanction has to blacklist the PSM, the DeFi market as an entire might be vulnerable to contagion.
An emergency Shutdown is probably going
In accordance with MakerDAO founder Rune Christensen, whereas the protocol might not resist sanctions within the quick run, it would take quick actions to arrange towards potential assaults. Rune mentioned:
“The most suitable choice is to depend on not getting sanctioned now, after which work on the basics we have to have in place to have the ability to truly resist an actual bodily assault. We should always simply settle for that in the event that they wish to shut us down, the end result is [an] emergency shutdown.”