Enable BUSD Borrowing on BNB Chain with 0.5% APR Cap
Summary:
This DIP proposes enabling the BUSD market on Unitus BSC with a borrowing interest rate cap of 0.5% APR and a borrowing cap of 250,000 BUSD. This measure is part of Unitus’s risk-managed approach to supporting legacy stablecoins while mitigating potential volatility and systemic risks associated with BUSD.
Background:
In light of regulatory actions by U.S. authorities and Paxos’s halt on new BUSD issuance, BUSD has experienced:
- Diminishing on-chain liquidity
- Gradual decline in market confidence
- Uncertain long-term viability
While BUSD continues to maintain its peg for now, the prudent course of action is to manage its market exposure in a controlled, transparent manner.
The dForce community has already approved the progressive wind-down of BUSD markets through DIP052 and the phased reduction of BUSD Loan-to-Value (LTV) ratios to 0% by January 4, 2024 via UIP003.
Motivation:
The Unitus Sunset Market provides an isolated, controlled environment to support tail-end or higher-risk assets like BUSD. Enabling the BUSD market within this framework, with strict risk parameters, ensures that:
Borrowing rates remain capped, preventing runaway interest rate spikes during liquidity crunches
Liquidation cascades and unintended systemic risks are avoided
A clear, orderly wind-down pathway for BUSD exposure is maintained within the Unitus ecosystem
Proposal:
We propose to:
- Enable BUSD borrowing on Unitus BSC
- Set a borrowing interest rate cap at 0.5% APR
- Implement a borrowing cap of 250,000 BUSD
All other parameters, including collateral factors and reserve factors, will remain unchanged at this stage and be subject to ongoing monitoring by the Unitus Risk Team. Future adjustments will remain under the authority of Unitus governance to ensure flexibility as market conditions evolve.