MakerDAO Promotes Removal Of Gemini’s $390 Million GUSD From Its Reserves

Key Points:

• MakerDAO intends to withdraw $390 million in cryptocurrency exchange Gemini’s GUSD stablecoin from its reserves.
• The Maker PSM presently controls more than 80% of the GUSD in circulation.
• Gemini offers marketing incentive payments based on GUSD maintained inside the PSM, which presently total 2% every year based on daily average balances.

MakerDAO, a decentralized finance (DeFi) lending platform and stablecoin issuer, may shortly withdraw $390 million in GUSD stablecoin from its reserves.

The protocol’s community is presently voting on a proposal known as the Peg Stability Module, which would reduce the maximum amount of GUSD kept in Maker’s DAI stablecoin reserve from $500 million to $110 million (PSM).

The Maker PSM presently controls more than 80% of the $568 million circulating GUSD supply, according to MakerDAO. Maker backs the $4.5 billion DAI’s value by keeping cryptocurrencies like Circle’s USDC and GUSD in reserve, as well as progressively investing in real-world assets like government bonds.

GUSD has less liquid DEX and CEX platforms than other major stablecoins, and trading volume is rather low. Although anybody with a Gemini account may create and redeem GUSD, overall access to and utilization of primary market liquidity is smaller compared to USDC, and most RWA companies have pre-existing connections to handle Circle rather than Gemini redemptions. These characteristics suggest that GUSD exposure may give DAI and vault customers with less liquidity and utility value than alternatives.

MakerDAO receives a 2% yearly incentive from Gemini, the crypto exchange created and controlled by Tyler and Cameron Winklevoss and the issuer of GUSD. Nevertheless, the suggestion stated that the platform may benefit from stronger income prospects, such as investing in short-term US Treasuries, which now provide potentially 4-5% or higher yields.

Although MakerDAO has not yet confirmed these modifications, if adopted, this proposal will bring parameters more in line with the new MIP104 language. To decrease the possibility of the PSM balance dropping below the minimum amount of 100 million GUSD tokens necessary to receive payments, the debt limit is recommended to be established at 110 million DAI.

Lowering the PSM-GUSD-A debt cap to 110 million DAI will not result in an immediate decrease in GUSD exposure. GUSD is likely to gradually flow out of the PSM as a result of arbitrage of the DAI peg and probable usage by RWA-related companies.

With less than 24 hours before the vote, about 94% of users who have already voted support the idea of reducing GUSD. A similar proposal in January, however, saw a late surge of votes in support of keeping the GUSD, giving that side a razor-thin 50.85% majority.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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