MakerDAO founder Rune Chirstensen has advised people from the decentralized autonomous organization (DAO) to “seriously consider” get yourself ready for the depeg of their DAI stablecoin in the U . s . States dollar (USD).
The founder’s comments came considering the lately announced sanctions on crypto mixer Tornado Cash, noting to MakerDAO’s Discord funnel on August. 11 the sanctions are “unfortunately more severe than When i first thought,” adding they should prepare to depeg its native stablecoin DAI in the USD to prevent any risk’s associated with Circle’s recent freezing of sanctioned USD Gold coin (USDC) addresses.
“I think we ought to you should consider getting ready to depeg from USD. It’s almost inevitable it has happened to which is only realistic related to immeasureable preparation.”
On August. 8, the U.S. Office of Foreign Asset Control (OFAC) formally barred residents by using the Tornado Cash protocol, while placing 44 USDC addresses associated with the woking platform on its listing of Specifically Designated Nationals.
Following a move, USDC issuers Circle froze $75,000 price of the stablecoin from the 44 sanctioned addresses.
rune: we ought to you should consider depegging from usd pic.twitter.com/HBMrPH7LrW
— banteg (@bantg) August 11, 2022
Around 50.1% of MakerDAO’s DAI is collateralized by USDC (according to Dai Stats) Christensen has elevated concerns within the asset’s heavy reliance upon a centralized asset in USDC, as Circle has proven that it’ll act in compliance with U . s . States law within the situation of Tornado Cash.
DAI is presently the 4th largest USD-pegged stablecoin in crypto using its market cap of $7 billion, and also the figure places it as being the 15 largest asset overall.
Ditching USDC backing
Following a call, Yearn.finance core developer @bantg recommended that MakerDAO was thinking about converting its USDC from the peg stability module into $3.5 billion in ETH, which may lead to greater than 50% of DAI being supported by Ether (ETH), an enormous jump in the 7.3% presently.
Related: DeFi platform Oasis to bar wallet addresses considered at-risk
The suggested idea came critique in the community, evaluating MakerDAO towards the unhappy Terra (LUNA) project, which strongly bought Bitcoin (BTC) to back its Terra USD stablecoin prior to the project ultimately imploded.
Ethereum co-founder Vitalik Buterin also chimed in, stating:
“Errr this appears just like a dangerous and terrible idea. If ETH drops a great deal, worth of collateral would go way lower but CDPs wouldn’t get liquidated, therefore the whole system would risk being a fractional reserve.”
However, Christensen later clarified that what he really “wrote within the maker governance discord was that yoloing all of the stablecoin collateral into ETH will be a bad idea.”
Things I really authored within the maker governance discord was that yoloing all of the stablecoin collateral into ETH will be a bad idea kek
— Rune (@RuneKek) August 11, 2022
Though he confirmed that the “partial yolo” could be advisable, noting:
“I think gradually DCA’ing some collateral into ETH is definitely an option that may be considered with respect to the harshness of the blacklisting risk, that we personally think is a lot greater following the TC blacklist… it might exchange blacklist risk for depeg and haircut risk.”
