Will MakerDAO Really Go Forward with an ‘Emergency Shutdown’ in Response to Sanctions
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- Circle and Coinbase established the Centre, which has already blacklisted 38 wallet addresses.
- DAI Tornado pool was identified as one of the blacklisted wallets.
- Users can use Marker’s Peg Stability Module (PSM) to swap different collateral types.
The US Treasury’s decision to sanction crypto-mixing service Tornado Cash has devastatingly impacted other firms in the market, and MakerDAO could be next. In response to the sanctions, Circle and Coinbase established the Centre, which has already blacklisted 38 wallet addresses. It has also frozen any USDC assets held by the wallets.
A DAI Tornado pool was identified as one of the blacklisted wallets. As a result, the MakerDAO community has expressed concerns about its USDC collateral and regulatory bodies’ risk to their ecosystem’s decentralization and stability.
In desperate need of readjusting its USDC collateral in light of the sanctions’ potential impact on the DeFi blue chip’s very own stablecoin – DAI.
DAI’s Exposure to USDC Puts It at Risk of Sanctions
MakerDAO is a forerunner among decentralized autonomous organizations. It has decentralized governance and organizational structure, and all processes are carried out using smart contracts. It is also in charge of minting and developing DAI (and Ethereum-based stablecoin).
Despite having a diverse portfolio of cryptocurrencies as collateral, DAI relies on USDC 33.9% of the time, making it the largest source of collateral backing up DAI. Others include 23.2% ETH and 7.6% WBTC, to name a few.
On Discord, MakerDAO delegate Chris Blec added to the ongoing discussion, “Good luck not getting sanctioned when DAI is already sitting in sanctioned smart contracts that can’t be paused.” He was adamant that using censorable assets as collateral would spell doom for the firm’s future.
Furthermore, community members are concerned about Maker’s USDC PSM contract, which holds over $3.56 billion in USDC, because some DAI users may have transferred their assets through the sanctioned Tornado Cash under USDC PSM. This will undoubtedly pique the interest of regulatory bodies.
Users can use Marker’s Peg Stability Module (PSM) to swap different collateral types, such as USDC, for DAI at a fixed rate. Thanks to this module, DAI can maintain a 1:1 peg to the dollar.
MakerDAO Community Members: Emergency Shutdown?
MakerDAO founder Rune Christensen admitted, “In the short run, we simply cannot resist a crackdown.”
However, he intends to propose a Decentralized Voter Committee, dubbed “Phoenix,” to devise a strategy for carrying out the emergency shutdown. “We should accept that if they want to shut us down, the result is [an] emergency shutdown,” he said.
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