The DAI is cast: MakerDAO votes to keep USDC as primary reserve
- MakerDAO community opts for USDC over other stablecoins as its primary reserve.
- USDC has since regained its peg, as its exchange reserve drops.
In a recent vote, the MakerDAO [MKR] community reignited its trust in Circle [USDC]. The vote result showed that Maker would keep USDC as its primary reserve.
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USDC to remain the primary MakerDAO backing
Two options were presented to the community for consideration regarding how the DAI token will be backed in a peg-stability-module proposal (PSM) filed on 17 March. The first option involved diversifying the Maker reserve, while the second involved keeping USDC as its primary reserve.
79.02% of the community voted to keep USDC as DAI’s primary reserve during the voting period from 20 – 23 March. Nonetheless, 20.69% of the community diversified the reserve among the USDC, USDP, and GUSD.
The USDC scare
Due to exposure to the bank through significant projects in the industry, the cryptocurrency market experienced a downturn following the bankruptcy of Silvergate bank. Circle was one of the crypto projects that had a significant amount of exposure to the bank, and as a result, FUD developed toward USDC. Due to the ensuing FUD, holders scrambled to liquidate their holdings, causing it to lose its peg.
DAI suffered due to its high USDC exposure, which caused it to lose its peg. DAI has approximately 3 billion USDC locked in its PSM, which is more than 55% of its PSM, according to statistics from daistats.
After the de-peg, the MakerDAO community considered adopting a proposal to add an emergency switch. The emergency switch would halt PSM swaps on its system, stopping the token purchases necessary for creating fresh DAI tokens.
The current state of USDC and DAI
According to CryptoQuant, USDC appears to have recovered from its initial downtime. The exchange reserve has returned to normal, as it had dropped from over 6 billion earlier in the month to roughly 3 billion.
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Moreover, according to statistics from CoinMarketCap, with a market valuation of nearly $34 billion, it remained the second-largest stablecoin. With a market worth more than $5 billion, Maker (DAI) came in fourth.
The latest proposal demonstrated how much DAI was exposed to USDC and how much faith the MakerDAO community had in USDC. It acknowledged that should USDC ever encounter any future FUD; DAI might fall along with it.