On March 16, lending protocol and stablecoin issuer MakerDAO passed a proposal to increase its portfolio holdings of United States Treasury bonds by 150%, from $500 million to $1.25 billion.

The proposal aims to increase the protocol’s exposure to real-world assets and high-quality bonds following the Dai stablecoin losing its $1 peg during market volatility on March 11. The $750 million debt ceiling hike was approved by 77% of Maker’s delegates.

MakerDAO plans to use $750 million of USDC in the PSM to purchase more US Treasury bonds, diversifying its liquid assets that back DAI. The bonds will be purchased with equal maturities, biweekly and over a six-month period, totaling 12 slots of $62.5 million each. MakerDAO expects to deliver a net annualized yield of 4.6% to 4.5% after custody and also aims to boost its revenue stream by trading costs.

The proposal would allow Maker “to take advantage of the current yield environment, and generate further revenue on Maker’s PSM Assets, in a flexible, liquid manner,” according to the proposal. Treasury’s yields for 10-year constant maturity were at 3.64% on March 14, according to Federal Reserve data.

The proposal was well-received, with 77% of Maker’s delegates voting in favor of it. MakerDAO will deploy the debt ceiling increase under the same terms and transaction mechanisms as set out and approved in MIP65. The debt ceiling increase will be deployed under a structure based on MIP65 to hold assets and mitigate any single entity exposure concerns. The implementation of the asset strategy will be carried out by Sygnum Bank under an execution mandate set out in a MakerDAO resolution instruction.

MakerDAO’s decision to increase its portfolio holdings of US Treasury bonds is expected to generate further revenue and reduce risks associated with volatile market conditions. The proposal was well-received by the DAO and is expected to be executed in a flexible, liquid manner to take advantage of the current yield environment. The move towards real-world assets and high-quality bonds is expected to improve the stability of MakerDAO’s stablecoin Dai and boost investor confidence.

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This article was republished from azcoinnews.com

Maker Governance, the decentralized autonomous organization behind the Maker Protocol, has made a series of emergency parameter changes aimed at reducing Maker’s exposure to volatile centralized stablecoins and reinforcing the DAI peg. These changes were deployed following an emergency executive vote that took place on Saturday, March 11, 2023.

The changes that have been made to the Maker Protocol include an increase in the USDC PSM USDC→DAI swap fee from 0% to 1%, a reduction in the USDP PSM USDP→DAI swap fee from 0.2% to 0%, an increase in the USDP PSM DAI→USDP swap fee from 0% to 1%, a reduction in the USDC PSM daily mint limit from 950 million DAI to 250 million DAI, and a reduction in the GUSD PSM daily mint limit from 50 million DAI to 10 million DAI.

Additionally, Maker Governance has increased the USDP PSM daily mint limit from 50 million DAI to 250 million DAI, increased the USDP PSM debt ceiling from 450 million DAI to 1 billion DAI, reduced the UNIV2USDCETH-A debt ceiling from 50 million DAI to 0 DAI, reduced the UNIV2DAIUSDC-A debt ceiling from 100 million DAI to 0 DAI, reduced the GUNIV3DAIUSDC1-A debt ceiling from 100 million DAI to 0 DAI, and reduced the GUNIV3DAIUSDC2-A debt ceiling from 100 million DAI to 0 DAI.

Maker Governance has also reduced the DIRECT-AAVEV2-DAI target borrow rate from 2% to 0% and reduced the DIRECT-COMPV2-DAI target borrow rate from 2% to 0% to deactivate D3M.

The rationales behind these changes are varied. The increase in the USDC PSM USDC→DAI swap fee aims to discourage swapping USDC for DAI via the PSM. The USDP PSM changes seek to enable USDP to provide liquidity in case DAI goes above the peg and limit USDP swaps for riskier stablecoins. The GUSD PSM changes aim to limit potential losses due to contagion risk.

Read more: https://azcoinnews.com/maker-protocol-deploys-parameter-changes-to-reinforce-dai-peg.html

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#MakerDAO the company that created the #DAI #Stablecoins pegged to the US dollar, stated in a forum post that on March 11, the company had various collaterals "exposed to USDC tail risk" as a result of the unusual de-pegging of the USD Coin (USDC) stablecoin that had started on March 10. For the DAI stablecoin, Maker DAO presently has more than 3.1 billion #USDC in collateral.

First, Maker suggests setting a debt ceiling of 0 DAI for the liquidity provider collaterals UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, and GUNIV3DAIUSDC2-A. In order to prevent "excessive dumping of USDC," Maker also wants to lower the daily minting limits of its USDC peg stability module from 950 million DAI to 250 million DAI and raise the fee from 0% to 1%. If the proposal is approved, Maker will also lower the daily minting limits of its #GUSD module from 50 million DAI to 10 million DAI.

Maker also wants to completely cut off exposure to the decentralized financial protocols Curve and Aave. While Aave doesn't have these risks, Maker still claimed that its "overall risk-reward of depositing funds into the D3M are not favorable under current conditions" because Curve "uses a fixed $1 price for USDC," which "presents a risk of bad debt accrual and potentially bank runs with cascading market insolvency if the market price of USDC falls significantly below the current collateral factor."

Last but not least, Maker suggests raising the protocol's debt ceiling from 450 million DAI to 1 billion DAI for the USDP stablecoin produced by Paxos. The company wrote:

"Paxos has relatively stronger reserve assets versus other available centralized stablecoins, consisting primarily of U.S. treasury bills, reverse repurchase agreements collateralized by U.S. treasury bonds. They face relatively lower potential for impairment versus other available stablecoins."

Since its issuer, Circle, reported it had $3.3 billion in money collateralizing the stablecoin trapped on the now-defunct Silicon Valley Bank, USDC depegged from the US dollar on March 10. The price of USDC at the time of posting is $0.9025. The DAI stablecoin has likewise degged to $0.9235 in response to the announcement.