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- Marc Zeller’s proposal to offboard Binance USD (BUSD) stablecoin from Aava’s V2 lending and borrowing market on Ethereum garnered massive support from the Aave community.
- The action plan aims to “reduce the amount of liquidity in BUSD” and incentivize users to leverage other stablecoin tokens on Aave.
- Zeller’s submitted the Aave Improvement Proposal (AIP) shortly after federal and state regulators cracked down on stablecoin issuer Paxos.
A proposal to offboard Binance USD (BUSD) from Aave’s V2 market on Ethereum received enormous support from community members.
The plan was initially submitted by Aave community member Marc Zeller in February shortly after the U.S. Securities and Exchange Commission (SEC) and New York’s Department of Financial Services (NYDFS) cracked down on BUSD issuer Paxos.
Zeller’s AIP proposed freezing the Paxos stablecoin on Aave ahead of an on-chain vote and changes to the decentralized lending protocol’s smart contract. The community member opined that BUSD’s supply will dwindle toward zero over time as Paxos can no longer mint new tokens.
The action plan centered around two key changes – a massive increase in the borrowing cost of BUSD and a reduction in lending interest.
Together, Zeller’s proposal suggested these changes would diminish interest in the Binance-branded stablecoin and incentivize users to switch to other stablecoins. Over 99% of the votes submitted were in favor of the plan with less than 1% of voters abstaining. No votes were cast against the proposal.
Per the community page, voters spent some 668,000 AAVE tokens to signal their support for offboarding the stablecoin from Aave’s V2 Ethereum market.
In a few hours I'll publish an AIP to enable the $BUSD Offboarding plan.
— Marc Zeller 👻 💜 🦇🔊 (@lemiscate) March 9, 2023
If this vote pass,
If you're providing $BUSD liquidity your revenue will go down & if you're borrowing it the cost of your borrow will increase.
Feel free to switch to others stablecoins in Aave. pic.twitter.com/TypMFM9vfk
Next, Zeller plans to launch another AIP that will go to a governance vote. If passed, changes to Aave’s smart contract, particularly regarding BUSD’s borrowing cost and lending interest, will be implemented.
Crypto Players Back Off BUSD
Aave is not the only crypto name that has moved to cut ties with the Binance-branded stablecoin. Coinbase announced plans to delist Binance USD, saying the token does not meet listing standards. The crypto exchange will shutter trading for the Paxos-issued stablecoin on Mar. 13 while withdrawals will continue afterward, per previous reports.