MakerDAO (MKR) founder Rune Christensen said: Asked Given the scope of the Tornado Cash sanctions, DAO members should consider converting their $3.5 billion USDC reserves into Ethereum (ETH).
MakerDAO is considering a $3.5 billion ETH market purchase, converting all USDC from its peg stable module into ETH.
— Bangteg (@bangtg) August 11, 2022
Christensen made this suggestion through the DAO Discord group state Additional research has shown him that the consequences of the Tornado Cash sanctions are more serious than originally thought.
Loon: De-pegging from USD should be seriously considered pic.twitter.com/HBMrPH7LrW
— Bangteg (@bangtg) August 11, 2022
“I think the preparations for de-pegging from the USD need to be seriously considered.
Meanwhile, Christensen later clarified He said Maker intended a “partial Yolo” to buy ETH with a portion of USDC collateral. He thinks it’s an option worth considering following the Tornado Cash embargo.
Yes, I think slow DCAing of collateral into ETH is an option that could be considered depending on the severity of the blacklisting risk. Personally, I think it’s much higher after TC Blacklist.Trade blacklist risk for depeg and haircut risk
— Rune (@RuneKek) August 11, 2022
Circle blacklist function is formidable
With around 40% of the DAI reserve held in USDC, the Protocol fears a situation that could be impacted by Circle sanctions.
In light of the recent USDC address blacklisting, it should come as no surprise that they are looking at risk mitigation and diversification by selling their USDC holdings.
While their potential approach for YOLO to buy $3.5 billion worth of ETH seems crazy
— Lucky (@Lucky_2147) August 11, 2022
However, converting $3.5 billion worth of reserves to Ethereum also risks DAI being depegged from the US dollar given the volatile nature of ETH and other cryptocurrencies.
Circle blocked 44 wallets licensed by the U.S. Office of Foreign Assets Control.
The stablecoin issuer has admitted that its actions go against the spirit of the open internet.
Crypto community compares ideas to Terra
Members of the cryptocurrency community have already compared the MakerDAO idea to buying Bitcoin (BTC) in the Terra ecosystem.
Dogwon level if true
After announcing the purchase like this, we don’t do it all at once
— DCinvestor.eth ⌐◨-◨ (@iamDCinvestor) August 11, 2022
Remember Terra / ust and btc collateral 😉
— JamieD’s BitcoinFraud (@ElPako81465943) August 11, 2022
— Dylan LeClair 🟠 (@DylanLeClair_) August 11, 2022
Why is LFG an immediate reminder of when and where to buy BTC (in terms of price action)?
— Tasal (@0xTasal) August 11, 2022
Buterin Rejects $3.5 Billion ETH Purchase Proposal
Ethereum co-founder Vitalik Buterin thinks Maker’s idea is bad. According to Buterin, “It sounds like a dangerous and scary idea,” especially since he would put the entire system at risk if ETH depreciated.
Hmm, this seems like a dangerous and terrible idea. If ETH drops significantly, the value of the collateral will drop significantly, but the CDP will not be liquidated, so there is a risk that the entire system will become a partial reserve.
—vitalik.eth (@VitalikButerin) August 11, 2022
Instead, Vitalik was suggested Diversification of stables as collateral. According to him, non-ETH collateral should not exceed 20% of the total, and in some cases, each jurisdiction should limit collateral to a maximum of 20%.
In my opinion, no single type of non-ETH collateral should be allowed to exceed 20% of the total. Perhaps even limit it to a maximum of 20% in a single jurisdiction.
If we can’t do that, we will limit the growth of DAI until we can (for example, by adding negative interest rates).
—vitalik.eth (@VitalikButerin) August 11, 2022
Buterin continued that reserve diversification could be “19% USDC, 19% EUR, 19% Singapore?”
19% USD, 19% EUR, 19% Singapore?
—vitalik.eth (@VitalikButerin) August 11, 2022
