coindesk.com
Decentralized finance (DeFi) lending protocol MakerDAO’s community has voted to ditch $500 million Paxos Dollar ($USDP) stablecoin from its reserves, impacting half of the token’s supply.
Voters unanimously favored to decrease the debt ceiling for $USDP to zero from $500 million, according to a vote concluded Thursday.
The decision has a significant impact on embattled stablecoin issuer Paxos, as Maker’s treasury holds roughly half of $USDP’s $1 billion supply. This comes after New York state regulators forced the company in February to halt minting Binance USD ($BUSD), another Paxos-helmed stablecoin. The market capitalization of $BUSD has cratered to $5 billion from $16 billion since then, according to CoinGecko data.
MakerDAO, issuer of the $5 billion $DAI stablecoin and one of the largest lending protocols in DeFi, is aiming to boost its revenues by investing its vast reserves in yield-generating strategies.
Gemini, issuer of the GUSD stablecoin, pays an incentive to MakerDAO for holding its stablecoin, while MakerDAO will soon earn a 2.6% yield on as much as $500 million of USDC from Coinbase Prime. The protocol also increasingly invests in real-world assets (RWA) such as tokenized short-term U.S. Treasury bonds via investment management firms.
The proposal for booting $USDP argued that holding the stablecoin does not accrue revenues for MakerDAO, hurting its capital efficiency as the protocol prepares to hike rewards rate for its own stablecoin, $DAI.
“While Paxos has raised the possibility of a marketing fee scheme, to date there has not been concrete progress towards implementing this,” per the proposal. “If marketing payments are eventually implemented, Maker would be able to increase $USDP debt ceilings in response.”