Maker DAO files emergency proposal addressing 3.1B USDC exposure

According to a forum post from Maker DAO, issuer of the U.S. dollar-pegged DAI stablecoin, on Mar. 11, the firm requested an “urgent executive proposal to mitigate risks to the protocol.” Maker said that it possessed multiple collaterals “exposed to USDC tail risk” in light of the extraordinary de-pegging of the USD Coin (USDC) stablecoin that began on Mar. 10.  Maker DAO currently possesses more than 3.1 billion USDC in collateral backing its DAI stablecoin. 
Firstly, Maker proposes reducing the debt ceiling of UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, and GUNIV3DAIUSDC2-A liquidity provider collaterals to 0 DAI. Next, Maker wants to reduce daily minting limits of its USDC peg stability module from 950 million DAI to 250 million DAI and increase the fee from 0% to 1% to prevent “excessive dumping of USDC.” Another stablecoin module, GUSD, will also see its daily minting limit reduced from 50 million DAI to 10 million DAI if the proposal passes.
Maker also wants to eliminate exposure to decentralized finance protocols Curve and Aave in their entirety. According to Maker, Curve “uses a fixed $1 price for USDC,” which “presents a risk of bad debt accrual and potentially bank runs with cascading market insolvency if the market price of USDC falls significantly below the current collateral factor.” While Aave doesn’t possess such risks, Maker nevertheless stated that its “overall risk-reward of depositing funds into the D3M are not favorable under current conditions.”
Finally, Maker proposes to increase the protocol’s debt ceiling to the USDP stablecoin issued by Paxos from 450 million DAI to 1 billion. The firm wrote:
“Paxos has relatively stronger reserve assets versus other available centralized stablecoins, consisting primarily of U.S. treasury bills, reverse repurchase agreements collateralized by U.S. treasury bonds. They face relatively lower potential for impairment versus other available stablecoins”
On Mar. 10, USDC depegged from the U.S. dollar after its issuer, Circle, disclosed it had $3.3 billion worth of funds collateralizing the stablecoin stuck on now-defunct Silicon Valley Bank. At the time of publication, USDC is currently trading at $0.9025. In light of the news, the DAI stablecoin has also degged to $0.9235.