MakerDAO halts its DAI stablecoin minting on Aave crypto lending platform

By Raffaele Redi

The move is a bid to mitigate Maker’s exposure to crypto lending platform Celsius

Two stacks of Dai stablecoins                                 
DAI is an Ethereum-based stablecoin managed by the Maker Protocol and the MakerDAO – Photo: Shutterstock
                                

MakerDAO, the organisation that manages the DAI stablecoin, temporarily disabled the Direct Deposit Module (D3M) for DeFi lending platform Aave to mitigate Maker’s exposure to crypto lending platform Celsius, which is on the verge of a possible bankruptcy.

“The Maker Governance has voted to temporarily disable the Aave DAI Direct Deposit Module,” tweeted MakerDAO, citing adverse “market conditions”.

“According to the Urgent Signal Request posted on the recommendation of the Risk Core Unit, this is a preventive measure against potentially unacceptable risks to the Maker Protocol,” added the DAO.

The Direct Deposit Module enables interaction between the Maker ecosystem and third-party lending pools, in this case Aave.

The proposal

The proposal, passed on 15 June 2022 and executed on 17 June 2022, set the Aave D3M Target Borrow Rate (bar) – the ideal rating for borrowing DAI on the Aave protocol, a decentralised finance protocol that allows users to lend and borrow crypto – to zero.

The move came as Aave had an exposure of DAI230m ($230m) borrowed on Aave Ethereum v2, while an additional DAI100m is being borrowed by Celsius and collateralised mostly by stETH, bringing MakerDAO’s overall exposure to Celsius to around $330m.

Meanwhile, the Celsius developers, who on 13 June 2022 halted all withdrawals, swaps and transfers between accounts, citing “extreme market conditions”, said in a note to users they would continue to stabilise Celsius liquidity while maintaining an open dialogue with regulators and officials.

Global online investment platform Bnk To The Future also offered Celsius developers a recovery plan, as the firm claims that over 1,000 of its investors are exposed to the crypto lender. 

DAI on the market

According to CoinMarketCap, DAI (DAI), the Ethereum-based stablecoin managed by the Maker Protocol and the MakerDAO decentralised autonomous organisation, recorded a trading volume of around $469m, down 19% over the past 24 hours, while DAI’s market cap was almost stable at 6.7bn.

The price of DAI, which is changing hands at $1 at press time, is soft-pegged to the US dollar and is collateralised by a mix of other cryptocurrencies that are deposited into smart contract vaults every time new DAI is minted.

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