MakerDAO founder proposes converting $3.5B USDC reserve to Ethereum

0
30

MakerDAO (MKR) founder Rune Christensen has asked DAO members to consider converting its $3.5 billion USDC reserves to Ethereum (ETH) because of the extent of the Tornado Cash sanctions.

Christensen made this suggestion via the DAO Discord group stating that additional research has shown him that the consequences of Tornado Cash sanction are more severe than initially thought.

“I think we should seriously consider preparing to depeg from USD. It is almost inevitable it will happen and it is only realistic to do with huge amounts of preparation.”

Meanwhile, Christensen later clarified that he intended a “partial Yolo” in which Maker buys ETH with some of its USDC collateral. He believes it is an option worth considering following the Tornado Cash embargo.

Circle blacklist function fears

With about 40% of DAI reserve held in USDC, the protocol fears a situation where it could be affected by Circle’s sanctions.

However, converting $3.5 billion worth of its reserves into Ethereum also presents a risk of DAI de-pegging from USD — given the volatile nature of ETH and other cryptocurrencies.

Circle had blocked the 44 wallets sanctioned by the US Office of Foreign Assets Control.

The stablecoin issuer conceded that its action was against the ethos of an open internet. However, it had to make a move to comply with existing laws.

Crypto community compares the idea to Terra

Crypto community members are already comparing MakerDAO’s idea to Terra ecosystem Bitcoin (BTC) purchase.

Buterin rejects the $3.5B ETH purchase idea

Ethereum co-founder Vitalik Buterin does not think Maker’s idea is good. According to Buterin, it “seems like a risky and terrible idea” because it places the whole system at risk, especially if the value of ETH drops.

Instead, Vitalik suggested a diversification of stables as collateral. According to him, non-ETH collateral should not exceed 20% of the total or possibly limit the collateral to a maximum of 20% in each jurisdiction.

Buterin continued that the reserve diversification could be “19% USDC, 19% some euro thing, 19% something out of Singapore?”

Posted In: Ethereum, DAOs


Credit: Source link

ads

LEAVE A REPLY

Please enter your comment!
Please enter your name here