MakerDAO Should «Seriously Consider Preparing» for DAI Depeg: Founder

The U.S. Treasury Department’s sanctions against Tornado Cash have led MakerDAO founder Rune Christensen to believe that the DAI creator is endangered by its $3.5 billion worth of USDC collateral.

$3.5 Billion Worth of USDC Reserves

The Tornado Cash sanctions are putting MakerDAO in a dangerous spot.

In two messages posted on Discord and later shared by Yearn.Finance developer banteg on Twitter, the DAI issuer’s founder Rune Christensen hinted that the protocol was endangered by its USDC reserves following U.S. sanctions against Tornado Cash. “I’ve been doing more research on the consequences of the [Tornado Cash] sanction and unfortunately it is much more serious than I first thought,” Christensen wrote before stating that MakerDAO should “seriously consider preparing” for an event in which DAI could lose its peg against the dollar.

Banteg also said that MakerDAO was weighing a “$3.5 billion ETH market buy,” indicating that Christensen may believe the protocol should sell its USDC reserves for ETH. USDC currently accounts for 32.7% of MakerDAO’s treasury reserves. The protocol has more than $11 billion of collateral in its treasury. 

The idea of converting USDC to ETH was criticized by prominent members of the crypto community. Ethereum creator Vitalik Buterin said that in case of an ETH price drop, the “whole system would risk becoming a fractional reserve.” 

MakerDAO is a decentralized stablecoin issuer. By posting collateral, users are allowed to mint the DAI cryptocurrency, which aims to always stay on parity with the U.S. dollar. 

The development comes after the U.S. Treasury Department added privacy protocol Tornado Cash to its list of sanctions on Monday.  This prompted Circle, the centralized stablecoin issuer of USDC, to freeze the USDC in Ethereum addresses that had interacted with the protocol.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies. 

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