MakerDAO votes to drop Pax Dollar (USDP) stablecoin from its reserves
- The MakerDAO community has voted to ditch Pax Dollar (USDP) stablecoin worth $500 million from its reserves.
- Maker’s treasury holds roughly half of the USDP’s $1 billion supply.
- New York state regulators in February forced Paxos to halt minting Binance USD (BUSD) stablecoin.
The decentralized finance (DeFi) lending protocol MakerDAO’s community has voted to drop the $500 million worth of USDP stablecoin from its reserves. This is a major blow to the Pax Dollar (USDP) stablecoin since the lending protocol held half of the USDP token supply.
In total, there is a $1 billion USDP token supply and after the vote, Maker will remove all the 500 USDP tokens from its reserves.
After dropping the USDP, MakerDAO, which is the issuer of the $5 billion DAI stablecoin and the governing body of Maker, which is one of the largest lending protocols in DeFi, will boost its revenues by investing its vast reserves in yield-generating strategies.
Examples of the yield-generating strategies that MakerDAO will invest in include Gemini, which pays an incentive to MakerDAO for holding its stablecoin, the GUSD. MakerDAO is also primed to earn a 2.6% yield on the $500 million of USDC it holds from Coinbase Prime.
Impact on the embattled Paxos
Paxos was in February forced by New York state regulators to halt minting Binance USD (BUSD) stablecoin. Since then, the market cap of the BUSD stablecoin has drastically declined from $16 billion to $5 billion according to data from Coingecko.
Although the Pax dollar metrics remained largely unaffected, the MakerDAO move has a significant impact on Paxos as a company.
The MakerDAO community argued that the USDP did not accrue any revenue for MakerDAO, something that hurt its capital efficiency as it plans to increase the rewards rate for DAI savings.
