While pointing out the current hit into stablecoin markets, an issuer of DAI stablecoin MakerDAO founder Rune Christensen has advised its DAO community on Discord server to seriously consider the precaution for de-pegging in their stablecoin with USD.
Rune Christensen emphasized that the platform should start preparing for a possible de-peg hit on DAI from the USD. He called the de-pegging issue inevitable while relating to Circle’s recent block on sanctioned USD Coin (USDC) addresses.
Recently, the U.S. Office of Foreign Asset Control (OFAC) made the announcement that prohibits Americans from using a crypto mixer, Tornado Cash. The app was allegedly involved in the money laundering of more than $7 billion.
The authority also placed 44 crypto wallet addresses with USDC holdings on the list of Specially Designated Nationals. It would be considered a crime if any netizens interact with these addresses from this list.
Following this, Circle has freezed $75,000 worth of USDC placed inside 44 listed wallet addresses.
Currently, MakerDAO’s stablecoin DAI heavily relies on USDC as it is collateralized by USDC at around 50.1%.
Christensen’s reason behind his thought is compliance that could force protocol to obey instructions and rules of the American regulatory body. This could disrupt the meaning of decentralization.
On Christensen’s concern, Yearn.finance core developer bantg suggested that MakerDAO would go for 50% backing with ETH, which will need $3.5 billion worth of ETH in collateral.
However, his thought was trashed on social media as it allegedly contains high risks. On this matter, Ethereum co-founder also replied that “Errr this seems like a risky and terrible idea. If ETH drops a lot, the value of collateral would go way down but CDPs would not get liquidated, so the whole system would risk becoming a fractional reserve.”
