Rune Christensen, the founder of MakerDAO, has suggested to its community the idea of unlinking Maker (MKR)’s stablecoin, DAI, from the USD and possibly, albeit gradually, aligning it with ethereum (ETH) instead. However, Vitalik Buterin has voiced strong opposition to this, labeling it a “terrible idea.”
Christensen conveyed his thoughts in the DAO’s Discord channel, which was highlighted by yearn.finance (YFI) core developer banteg. He expressed to the community,
“I believe we should contemplate the idea of moving away from a USD peg… Given the evolving landscape, such a shift seems almost unavoidable, but it demands substantial groundwork.”
The rationale behind Christensen’s perspective was influenced by the US Treasury’s decision to impose sanctions on the widely-used mixer, Tornado Cash.
This week saw significant actions from the Treasury’s Office of Foreign Assets Control (OFAC), as they imposed a ban on the Ethereum-based crypto mixing service, Tornado Cash, within the U.S. The consensus within the crypto community acknowledges that while malevolent players might exploit services like Tornado Cash for illicit financial activities, applications that ensure privacy remain crucial. The OFAC’s decision is being viewed by many as a pivotal juncture in the trajectory of crypto regulations.
The repercussions of the ban were immediately evident. Circle, the entity responsible for issuing the USD coin (USDC) stablecoin, took prompt actions to freeze assets, starting with a substantial amount of approximately USD 75,000 connected to Tornado.
This move is especially significant given that, according to Dai Stats, almost half of DAI’s backing comes from USDC.
Addressing the severity of the situation, Christensen expressed,
“After delving deeper into the implications of the [Tornado Cash] sanction, I’ve come to realize that the situation is considerably more grave than I initially assessed.”
In a recent post, developer banteg revealed that MakerDAO is contemplating the idea of transitioning its USDC from the peg stability module to ETH.
However, this proposal was met with skepticism. Ethereum’s co-founder, Vitalik Buterin, vehemently labeled it a “terrible idea”. He highlighted the inherent risk, emphasizing that a significant drop in ETH’s price would drastically reduce the “value of collateral,” leading to potential complications and resultant consequences.
Echoing these sentiments, Tron (TRX) founder, Justin Sun, also concurred with Buterin.
Rune Christensen, while clarifying his stance, pointed out,
“I actually mentioned in the maker governance discord that impulsively converting all the stablecoin collateral to ETH would be inadvisable.”
Nevertheless, he did acknowledge the possibility of a measured and gradual shift of some collateral into ETH.
As of 9:50 UTC, MKR is trading at USD 1,090, experiencing a 2% drop in 24 hours but reflecting a 3% rise over the past week. CoinGecko ranks DAI as the 4th top stablecoin by market capitalization, valued at USD 6.95 billion.