- MakerDAO will ditch $500 million worth of the Paxos stablecoin USDP from its reserves
- The community voted on Thursday to remove the backing, which represents half of USDP’s total supply
- Paxos has been the subject of regulatory action this year regarding Binance’s BUSD coin
The MakerDAO community has conducted a vote to remove $500 million worth of Paxos Dollar (USDP) stablecoin from its reserves, which accounts for half of the token’s total supply. The vote, concluded on Thursday, resulted in unanimous support for reducing the debt ceiling for USDP from $500 million to zero. The decision is a blow for Paxos, the issuer of the stablecoin, given that MakerDAO’s treasury currently holds approximately half of USDP’s total supply.
Proposal Cited Liquidity and Revenue Issues
The proposal to drop USDP from MakerDAO’s reserves was put forward on May 26, with the proposer suggesting that USDP had lower liquidity compared to other stablecoins and that the unfavorable revenue received for holding it could affect Maker’s financial performance and economic safety. Respondents also referred to Paxos’ involvement with BUSD, which New York regulators compelled it to stop minting back in February.
The poll called for a gradual reduction in USDP backing rather than a full, immediate withdrawal to ensure that the DAI stablecoins is not adversely affected. The result of the vote was as conclusive as a vote can possibly be, with 100% of the votes supporting the move:
The decision to remove USDP from MakerDAO’s reserves reflects the community’s assessment of the stablecoin’s risk profile or its strategic shift in reserve allocation, while the impact on Paxos underscores the challenges faced by stablecoin issuers in a rapidly evolving regulatory landscape.
MakerDAO has previously considered ditching the USDC stablecoin after its decision to freeze USDC tokens related to the Tornado Cash affair in 2022.