It is proposed to:
- update risk parameters for BUSD on dForce Lending;
- remove BUSD from USX’s liquidity stability reserve (LSR) across all networks supported;
- update risk parameters for USDC, USDT, USX on the KAVA network.
Summary
The NYDFS recently ordered Paxos to stop minting BUSD. Consequently, Paxos would stop issuing new BUSD but will continue to support the redemption of pre-existing BUSD for their underlying value.
That said, BUSD market cap will only decrease over time and users are recommended to switch to other stablecoins.
Motivation
In response to the recent regulatory concerns and cautionary measures taken by Paxos, we propose to de-risk our BUSD exposure with a gradual step-down adjustment on TVL and other parameters:
- LTV reduce from 85% to 70% with a reduction of 5% each week after governance approval (it will take about 3 weeks to bring it down to 70%, users who use BUSD as collaterals needs to be aware of the change to avoid liquidation)
- Lower Supply Cap and Borrow Cap for BUSD from 20,000,000 to 5,000,000 on supported networks
- Remove BUSD from USX’s Liquidity Stability Reserves (LSR) on BSC (but existing BUSD reserve can still be burned into USX until it runs to zero)
Also, it is proposed to lower the Supply Cap and Borrow Cap for USDC, USDT, and USX on the KAVA network to 2,000,000.
Proposal
- Yes - update risk parameters as proposed
- Against - do nothing
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