The Aave community has approved a proposal to remove USDS as eligible collateral and alter financial parameters, with over 99% voting support, pending execution.
This decision addresses revenue decline and risk associated with USDS while stirring debate on stablecoin utility and potential reintegration with improved transparency.
Aave's Risk Management and USDS's Market Impact
The Aave Chan Initiative, an internal committee, proposed to halt USDS's collateral eligibility, citing declining yield contributions and increased risk exposure. Passed with nearly unanimous support, the proposal also adjusts USDS's loan-to-value ratio to 0%. This decision is expected to minimize risk exposure for Aave's protocol.
The removal of USDS from collateral eligibility and exclusion from e-Mode is expected to reshape its risk profile, although it could impact Aave's revenue. Increasing reserves from 10% to 25% might help counterbalance revenue loss from reduced collateral. Rune Christensen, MakerDAO's founder, stated that this move "misinterprets how USDS operates within the Sky ecosystem." Despite his criticism, he sees the potential for future reinstatement of USDS if transparency and scalability improve.
"If Sky significantly improves transparency and scalability through Data Hub, Grove, and Sentinel Network, USDS still has a chance to return to the Aave collateral asset list." — Rune Christensen, Founder, MakerDAO
USDS Trading Figures and Aave's Strategic Outlook
The Aave community previously made similar adjustments, like reducing DAI’s LTV amid broader risk reassessments, showcasing their proactive risk management strategies.
According to CoinMarketCap, Sperax USD (USDs) trades at $1.00, with a market cap of $872,426. Over the past 24 hours, its volume was $93,893, declining by 2.83%. USDs is experiencing gradual price changes, consistent across recent months, depicting stability amidst the current decisions.
Coincu analysts predict that Aave may experience enhanced financial stability through increased reserve factors while reducing exposure to USDS-related risks. Aave’s proactive stance enables it to better manage market volatility and sustain long-term growth.