# \[ARFC\] Enabling USDT as collateral on Aave v3 AVAX Market
**URL:** https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632
**Category:** Governance
**Created:** [August 25, 2023, 10:03am UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632 "2023-08-25T10:03:34Z")
**Posts on this page:** 6
**Page:** 1
### Author:  [@Alice](https://governance.aave.com/u/Alice)
#### Post date: [August 25, 2023, 10:03am UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/1 "2023-08-25T10:03:34Z")
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## **title: [ARFC] Enabling USDT as collateral on Aave v3 AVAX Market** **author: Alice Rozengarden @Alice - Aave-chan initiative** **date: 2023-08-25**
# Summary:
This proposal seeks to enable USDT as collateral on the V3 AVAX market outside of isolation mode as well as update the risk parameters to be on par with USDC.
# Motivation:
Enabling USDT as a normal collateral with those updated parameters would incentivize the use of USDT to borrow other assets on the v3 AVAX market. This would increase protocol revenue as well as the attractiveness of the platform for lenders. This change would be aligned with other [changes](https://governance.aave.com/t/arfc-usdt-risk-parameters-update-aave-v3-eth-pool/13571) started to increase USDT utility across the various Aave markets.
# Specification:
The following table highlights the proposed change for USDT on the v3 AVAX market (as well as those for USDC for reference):
| Parameters | USDT (current) | USDT (proposed) | USDC (for reference) |
| --- | --- | --- | --- |
| Supply Cap | 200M | 170M | 170M |
| Borrow Cap | 140M | 90M | 90M |
| LTV | 75% | 82.25% | 82.25% |
| LT | 81% | 86.25% | 86.25% |
| LB | 5% | 4% | 4% |
| Isolation Mode | Yes | No | No |
| Debt ceiling | 5M | N/A | N/A |
# Disclaimer:
This proposal is powered by Skyward.
The author isn’t compensated by Tether for this ARFC.
# Next step:
1. Gather community & risk provider feedback.
2. If consensus is reached, launch a snapshot.
3. Should said snapshot be successful, have guardians execute the payload (No AIP for AVAX)
# Copyright:
Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).
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### Author:  [@Alice](https://governance.aave.com/u/Alice)
#### Post date: [August 25, 2023, 10:06am UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/2 "2023-08-25T10:06:00Z")
We would like feedback from the risk providers on the proposed risk parameters and caps. Thanks in advance.
@Gauntlet , @ChaosLabs
---
### Author:  [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [August 25, 2023, 2:46pm UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/3 "2023-08-25T14:46:12Z")
As we’ve commented in previous [discussions](https://governance.aave.com/t/arc-enable-usdt-as-collateral-on-aave-v3-avalanche-re-subbmited/12491/3), we support listing USDT outside of E-mode. As the community has been positive towards enabling USDT as collateral and voted to enable this on V3 Ethereum, the same could be considered across all Aave deployments.
Regarding the specific parameter recommendations, we recommend initially maintaining the current LT, LTV, and LB configurations. We could consider optimizations after assessing usage subsequent to the implementation of this proposal, leveraging our simulation platform.
In addition, given the current supply and borrow and the elimination of the debt ceiling, we recommend reducing the caps to 100M and 80M, respectively. These caps could be easily adjusted by the Risk Steward given increasing demand.
### Recommendations:
| Parameters | USDT (current) | USDT (proposed) |
| --- | --- | --- |
| Supply Cap | 200M | 100M |
| Borrow Cap | 140M | 80M |
| LTV | 75% | No Change |
| LT | 81% | No Change |
| LB | 5% | No Change |
| Isolation Mode | Yes | No |
---
### Author:  [@Gauntlet](https://governance.aave.com/u/Gauntlet)
#### Post date: [August 29, 2023, 10:04pm UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/4 "2023-08-29T22:04:32Z")
We’ve commented[previously](https://governance.aave.com/t/arc-enable-usdt-as-collateral-on-aave-v3-avalanche-re-subbmited/12491/8) on our support to add USDT as collateral to Avalanche v3. Removing USDT from isolation mode could provide users a buffer for liquidations by allowing users to open more diverse positions.
In the end, it is up to the community to determine whether or not they are concerned with the centralization risk associated with USDT. Our linked analysis only covers market risk and not smart contract risk, regulatory risk, or other technical risks.
We recommend maintaining LTV, LT, LB parameters and reducing supply and borrow caps. Our linked analysis recommended lowering supply caps to 20% (~130m) of the circulating supply to begin with. Given current low usage, we support lowering the supply caps further to 100m.
| Parameters | USDT (recommended) |
| --- | --- |
| Supply Cap | 100M |
| Borrow Cap | 80M |
| LTV | 75% |
| LT | 81% |
| LB | 5% |
| Isolation Mode | No |
---
### Author:  [@MarcZeller](https://governance.aave.com/u/MarcZeller)
#### Post date: [August 30, 2023, 7:40am UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/5 "2023-08-30T07:40:40Z")
this proposal has been escalated to [snapshot stage](https://snapshot.org/#/aave.eth/proposal/0x5623b5f84f021ad787033b4a1efd9e2de417004d27c5f2e3d7351f9b575574b1)
voting starts tomorrow
---
### Author:  [@system](https://governance.aave.com/u/system)
#### Post date: [September 29, 2023, 7:41am UTC](https://governance.aave.com/t/arfc-enabling-usdt-as-collateral-on-aave-v3-avax-market/14632/6 "2023-09-29T07:41:35Z")
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