MakerDAO Increases DAI Holding Interest Rate After Removing USDP and Reducing GUSD

MakerDAO has approved a proposal to increase the savings rate for DAI holders following significant adjustments to the stablecoin's reserve assets.

MakerDAO Increases DAI Holding Interest Rate After Removing USDP and Reducing GUSD

In a proposal concluded on June 15, the MakerDAO community has agreed to raise the DAI Savings Rate (DSR) from 1% to 3.49%, encouraging investors to hold and lend the stablecoin DAI. This new interest rate will take effect on June 19. Consequently, the cost of collateral for borrowing DAI will also increase.

The proposal comes as MakerDAO adjusts its DAI reserve assets, including the addition of $1.25 billion in U.S. Treasury bonds—real-world assets known for their high safety—to reduce dependence on traditional stablecoins like USDC or GUSD.

As of late May 2023, the proportion of USDC in MakerDAO's reserve had decreased from 50% in mid-2022 to just 23%.

In another vote concluded on June 1, the MakerDAO community decided to remove $500 million in USDP stablecoins from DAI's reserve. Notably, MakerDAO had held up to half of the total $1 billion supply of this stablecoin. USDP is issued by Paxos, the same company that issues Binance’s BUSD, which was ordered by U.S. authorities to cease support for BUSD in February.

Additionally, MakerDAO recently approved a proposal to reduce its holdings of GUSD, the stablecoin issued by Gemini exchange, by $390 million. The proposal passed with 84% approval. This decision significantly impacts GUSD, as MakerDAO currently holds 88% of the circulating supply (about $568 million) of this stablecoin.

Impact on the Stablecoin Ecosystem

These changes reflect MakerDAO's strategy to diversify and secure its reserve assets, ensuring greater stability and reducing reliance on any single stablecoin. The increase in the DAI Savings Rate is expected to attract more users to hold and lend DAI, potentially increasing its market demand and stability.

Conclusion

MakerDAO’s strategic adjustments to its reserve assets and the increased savings rate for DAI holders signify a cautious approach towards enhancing stability and growth within the DeFi ecosystem. As the community continues to make informed decisions, MakerDAO remains a critical player in the evolving landscape of decentralized finance.