MakerDAO removes USDP stablecoin from reserves.
- The MakerDAO community voted to remove the Pax Dollar (USDP) stablecoin, which is worth $500 million, from their reserves.
- The Maker’s treasury holds approximately half of the USDP’s $1 billion total supply.
- In February, New York state regulators forced Paxos to stop creating Binance USD (BUSD) stablecoin.
The MakerDAO community, a decentralized finance (DeFi) lending protocol, decided to remove $500 million worth of the USDP stablecoin from their reserves. This is a significant setback for Pax Dollar (USDP) since the lending protocol held half of the USDP token supply.
The total supply of USDP tokens is $1 billion, and after the vote, Maker will remove all 500 USDP tokens from its reserves.
After removing USDP, MakerDAO, which is the issuer of the $5 billion DAI stablecoin, and one of the largest lending protocols in DeFi, will increase its revenues by investing its vast reserves in yield-generating strategies.
MakerDAO will invest in yield-generating strategies, such as Gemini, which pays an incentive to MakerDAO for holding its stablecoin, GUSD. MakerDAO is also expected to earn a 2.6% yield on the $500 million of USDC it holds from blockchain Prime.
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Impact on the embattled Paxos
In February, New York state regulators forced Paxos to stop creating 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 metrics for Pax Dollar remained largely unaffected, the MakerDAO move has a significant impact on Paxos as a company.
The MakerDAO community argued that the USDP did not generate any revenue for MakerDAO, which hurt its capital efficiency as it plans to increase the rewards rate for DAI savings.