USDC Remains the Primary Reserve on MakerDAO After Voting Process

  • Over 79% of MakerDAO’s community voted to maintain USDC as the primary reserve.
  • The latest poll was based on a proposal by MakerDAO’s Risk Core Unit.

Based on the outcome of a governance poll on MakerDAO, the DeFi giant’s community has overwhelmingly voted in favor of retaining the USDC stablecoin as a primary reserve. In the poll, which concluded on Thursday, March 23, 2023, 79.02% of MakerDAO’s community voted to maintain USDC as the primary reserve, while 20.69% supported diversification across multiple stablecoins.

The poll was based on a proposal by MakerDAO’s Risk Core Unit. The unit suggested distributing the network’s Peg Stability Module (PSM) stablecoin reserves across multiple assets. That could provide the benefits of diversification and risk distribution, where an impairment to one stablecoin would have a lesser impact on the network’s solvency.

Users believe the depegging recently encountered by USDC in the aftermath of the Silicon Valley Bank collapse may have triggered the call for reserve diversification. According to the core team, the proposal targets mitigating the risks associated with such developments.

The poll’s outcome suggests that the community is confident in the stability of USDC, which makes up a major part of MakerDAO’s PSM assets, with about $3.07 billion locked in the stablecoin.

Besides the risk diversification benefits of adopting a multiple reserve system, MakerDAO’s core team noted a few drawbacks that could arise, assuming the community agreed to adopt other stablecoins as a reserve, along with USDC. According to the team, significant minting or redemptions over a short period could present challenges to issuers of MakerDAO’s other PSM assets, GUSD and USDP.

Another possible setback that could affect user experience would be the imposition of fees for USDC to DAI swaps.

The poll results suggest that the MarkerDAO community is more comfortable with the risks associated with the single primary reserve, which includes the possibility of introducing a debt ceiling breaker in the event of another depeg risk event. That would require concentrating minting capacity in the USDC PSM and reducing available liquidity. It would also create a risky situation for collateralized vaults whenever DAI spikes upward.

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