MakerDAO [MKR] reacts to Stablecoin contagion with this proposal
MakerDAO is making moves aimed at protecting against exposure to risk associated with stablecoins. This is in response to USDC’s recent de-pegging which reignited concerns about stablecoins under unfavorable market conditions.
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MakerDAO aims to address the stablecoin challenge with an emergency proposal. The latter will focus to limit exposure to distressed stablecoins while also strengthening the stability of DAI’s peg.
The DeFi platform reportedly aims to achieve those goals by increasing USDC-DAI swap fees. A 250 million DAI daily mint limit will also be implemented if the proposal is passed.
<p lang=«en» dir=«ltr» xml:lang=«en»>To address the uncertainty surrounding the centralized stablecoin market, the Risk Core Unit has submitted an emergency proposal for Executive Vote to limit Maker’s exposure to impaired stablecoins and reinforce the DAI peg.→ https://t.co/Kjb0fSlZNX
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— Maker (@MakerDAO) March 11, 2023
The rationale for higher swap fees is that it will discourage USDC-DAI swaps while offering an incentive for alternative ways of offloading USDC. Failure to execute such moves may lead to more exposure to liquidity risks associated with stablecoin runs.
Some of the incentives in the proposal include a higher debt ceiling of 1 billion DAI. The DeFi platform also aims to reduce the USDP to DAI swap fee to 0%.
MakerDAO’s native token MKR fell off a bearish cliff last week, resulting in a 37% pullback from its previous high.
A strong selloff saw it push as low as $597.12, followed by a 20% recovery to its $728 press time price. The recovery on Saturday (11 March) makes it one of the few top tokens that have achieved a sizable bounceback.
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