MakerDAO may add USDC collateral support to mitigate liquidity risk

• MakerDAO could potentially use USDC as alternative collateral to help them manage liquidity risks.
• This move by MakerDAO will potentially allow locking up USDC, minting DAI and selling it for USDC.

The MakerDAO community is reportedly planning to add support for Circle’s UDSC. As per a community thread, USDC will be an alternative collateral to help them manage the liquidity risk that they’re presently facing in an uncertain market. On March 16, MakerDAO’s Foundation Dev team had a call to discuss the code for a USDC collateral adaptor.

This move by MakerDAO will potentially allow locking up USDC, minting DAI and selling it for USDC to restore its liquidity and push its peg back toward $1. Additionally, it will enable vault holders to close their Vaults without bearing losses.

On the flip side, adding USDC support would decrease DAI’s decentralized “purity” since it would no longer be backed 100% by decentralized assets and add to its regulatory risk. A MakerDAO representative presented the following point to explain how USDC integration will not destroy the project’s decentralization:

DAI is decentralized because there is no central authority that mints or custodies or approves people’s access to it. The individual does all of it for themselves, that’s why the community is driving the parameters of the systems (per the discussions in forum).

The community has been discussing the potential for all kinds of assets as acceptable collateral in the system for ages. Many of those assets are not decentralized, like tokenized securities, should they ever be accepted by MKR holders. To say that DAI is not decentralized because of some of the assets that might back it would be erroneous.