After Circle freezes blacklisted Tornado Cash addresses, MakerDAO is reassessing the risks associated with USDC collateral.
On August 8th, the issuer of the USDC stablecoin Circle froze its USDC tokens. 38 Wallet blacklisted address US Treasury Department.one of the wallets DAI Tornado Pool. As a result, the MakerDAO community has raised concerns about its exposure to USDC and the risk of regulatory tracking.
We have time, but we need to start.
— Eric Voorhees (@ErikVoorhees) August 8, 2022
In response, the community has been actively engaging in in-depth discussions via our Discord channel going forward.
DAI’s exposure to USDC and sanctions risks
DAI has a market cap of $7.5 billion, making it the largest DeFi protocol by total locked value.it is backed by the present It has assets such as 33.9% USDC, 23.2% ETH, and 7.6% WBTC.When $3.56 billion USDC is locked in the Maker Protocol and USDC represents the largest source of collateral.
The sustainability of DAI has been questioned as it is heavily backed by collateral that can be censored by regulators. MakerDAO President Chris Blec believes it could lead to sanctions against DAI
“If DAI is already in a sanctioned smart contract that cannot be suspended, we are lucky that it will not be sanctioned,” added Blec.
Another issue we’re seeing with the community has to do with Maker’s Peg Stability Module (PSM). PSM allows users to convert certain types of collateral directly into DAI at a fixed rate. Maker’s USDC PSM contract is held at this time. 3.56 billion USDC.
Some DAI users interacted with Tornado Cash via USDC PSM, so there may be contracts involved during the investigation. If sanctions force PSM to be blacklisted, the entire DeFi market could be at risk of contagion.
Emergency shutdown likely
According to MakerDAO founder Rune Christensen, the protocol may not be able to resist sanctions in the short term, but it will take immediate action to prepare for potential attacks.
“The best option now is to hopefully be unsanctioned and work on the foundations needed to be able to actually resist real physical attacks. If they want to shut us down. ,Result is [an] emergency shutdown. ”
