[ARFC] Freeze BUSD on Aave V2

Governance
1

[ARFC] Freeze BUSD on Aave V2

title: [ARFC] Freeze BUSD on Aave V2

Author: @marczeller - Aave Chan Initiative

Dated: 2023-02-13

Summary

Following the recent developments between Paxos (minter of BUSD) and the SEC,

Paxos will stop minting BUSD from April 2023 and will only allow redemption for their underlying value by burning BUSD.

The circulating supply of BUSD will thus trend toward zero over time.

This ARFC presents the Aave governance with the opportunity to freeze BUSD reserve on the Aave V2 Ethereum market.

Abstract

This ARFC proposes to freeze the BUSD reserve on the Aave V2 Ethereum market.

Motivation

While BUSD is not an asset with borrowing power, and recent development does not present risks of excess debt, From April 2023, the circulating supply of this asset will eventually go toward zero.

As there’s no real prospect of growth and the inability to mint new BUSD might hurt peg arbitrage opportunity and asset peg. It seems that the most reasonable path for Aave is to freeze this reserve and invite users to switch to another stablecoin among the diversity present in Aave.

As there’s no immediate risk for the protocol, the ACI doesn’t call for a fast-track process for this ARFC, and the standard governance process seems fit.

Specification

Ticker: BUSD (BUSD)

Contract Address: 0x4Fabb145d64652a948d72533023f6E7A623C7C53

Disclaimer

The Aave-Chan Initiative is not linked to nor paid by Binance/Paxos to publish this ARFC

Copyright

Copyright and related rights waived via CC0,

6 Likes
2

In favour of this proposal, as there is for now, no more room for BUSD to grow it makes sense to freeze this asset.
Also i would think about the aBUSD in the treasury, if it makes sense to swap them to another stablecoin on curve or buy back Aave from the market. Just to mitigate any future risk.

Thanks Marc for bringing this ARFC so fast.

3

I agree on swapping BUSD for another stable, but there’s no particular reason for a depeg under 1$ for BUSD (and even probability of a depeg > 1$)

So there’s no real rush for this. I think it’s most efficient to include this in one of the future treasury management AIP instead of creating a proposal just for this.

Currently, the DAO collector contract holds ~10.5k$ worth of BUSD.

3 Likes
4

Thanks, @MarcZeller, for bringing this to the forums quickly. Given the recent developments, Gauntlet agrees with freezing BUSD.

1 Like
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Thanks @MarcZeller for putting this up quickly! We are in support.

2 Likes
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Update: the information on the ARFC is incorrect and based on early information that was proven wrong.

Paxos from direct source will cease minting activity on BUSD from the 21st of Feb instead of April.

While I still don’t think there’s a direct risk for the Aave protocol, if governance agrees, the ACI suggests escalating this proposal to the snapshot stage tomorrow with a direct open voting, and an aim to publish an AIP if the snapshot outcome is YAE during the weekend.

This accelerated process would allow, assuming good sync, a potential execution of the freezeReserve() on Feb 23rd, two days after the minting cessation.

Another option is going to the AIP stage without a snapshot vote, that option would potentially freeze BUSD in sync/before the minting stop by Paxos, but we have to share that as the protocol is not, particularly at risk, we’re not very keen to create precedence.

So 3 options:

  1. keep the standard process: execution if governance outcome is yes and good sync ETA for execution on Feb 26th

  2. Direct to snapshot: ETA for Feb 23rd

  3. direct to AIP: ETA for Feb 19th (two days before minting stop)

The ACI is neutral on these options and will follow governance feedback,

  • Normal governance process
  • Direct to snapshot
  • Direct to AIP
0 voters
7

We support this and commend a strong pulse on what is occurring in the ecosystem.

Due to the updated timing of the minting controls, we support going direct to Snapshot - and voted accordingly in the poll above.

1 Like
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following poll result proposal is now live on snapshot.

if the outcome is YAE, The ACI will publish an AIP next Monday.

1 Like
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AIP-162 has been executed.

The ACI will publish a offboarding plan & roadmap for this asset shortly