Rune Christensen, founder of MakerDAO MKR, asked DAO members to convert its $3.5 billion USDC reserves toEthereum ETH because of the extent of the Tornado Cash sanctions.
Christensen made a suggestion via the DAO Discord group stating that additional research shows that the consequences of Tornado Cash sanction are more severe than initially thought.
Christensen later clarified that he intended to make a partial Yolo in which Maker buys ETH with some of its USDC collateral. He believes that it is an option worth considering following the Tornado Cash embargo.
The protocol fears that it could be hampered by Circle's sanctions if 40% of the DAI reserve is held in USDC.
The risk of DAI de-pegging from USD is because of the volatile nature of ETH and other cryptocurrencies when converting $3.5 billion of its reserves intoEthereum.
Circle had blocked 44 wallets sanctioned by the US Office of Foreign Assets Control.
The issuer of stable coins admitted that it was against the ethos of an open internet. It had to make a move to comply with existing laws.
The idea of MakerDAO is similar to the Terra ecosystem purchase of Bitcoin, and the community is already comparing it.
Vitalik Buterin is not convinced that Maker's idea is good. It seems like a risky idea because it puts the whole system at risk, especially if the value of ETH drops.
Vitalik suggested a diversification of stables as collateral. He said that non-ETH collateral should not exceed 20% of the total or possibly limit the collateral to a maximum of 20% in each jurisdiction.
Buterin said that reserve diversification could be 19% USDC, 19% some euro thing, 19% something out of Singapore?