[ARFC] Gauntlet USDC.e Supply and Borrow Cap Recommendation on Optimism Aave v3

[Gauntlet]

Summary:

Gauntlet recommends increasing supply and borrow caps for the following assets that have utilization rate of above 75%. The recommendations are made to improve capital efficiency - Gauntlet has not received any guidance from Circle on OP about removing support to USDC.e.

Asset	Chain	Current Supply Cap	New Supply Cap	Current Borrow Cap	New Borrow Cap
USDC.e	Optimism v3	18,000,000	30,000,000	15,500,000	28,000,000

Motivation:

Gauntlet proposes to increase supply/borrow caps for the assets below in order to meet the increasing demand.

Specifications:

USDC.e on Optimism Aave v3

We propose an increase Supply cap for USDC.e by 67% and Borrow cap by 80% in line within our borrow/supply cap framework which considers tokens needed to break-even for a long attack as well as overall circulating supply.

USDC.e Borrow Amount

USDC.e is the second largest asset by borrow amount on Optimism v3 markets with 14.8mm USDC.e borrowed, providing more impetus for increased cap values.

Next Steps

Once we receive feedback from @ChaosLabs on the above recommendations, we will move forward with Risk Steward actions.

[ChaosLabs]

The supply and borrow caps for USDC.e on Optimism (and other deployments) were reduced in an AIP following the proposal to onboard native USDC across Aave markets. From a risk perspective, we support the proposed increase, however, given the context above, we suggest gauging community preference via Snapshot before utilizing the risk steward.

[Gauntlet]

The snapshot has been posted here.

[MarcZeller]

the ACI does not support this proposal

USDC.e is the legacy version of USDC, circle wants to support native USDC and having assets linked to bridge safety is factually more risky than native assets.

Allowing growth of legacy assets is not recommended.

We’ll cast a NAY vote for this proposal.

[EzR3aL]

Better too late than never…

I also wanted to express my opinion on this ARFC. A few weeks ago with the helping hand of Skyward I created the proposal to onboard native USDC to Base, Optimism and Polygon. This was done in order to decrease the bridged version of USDC in favor for native USDC.
Increasing caps for USDC.e would only result in a longer co existence of USDC.e and native USDC.

While I do think the current caps shouldn’t be decreased because of revenue, I do think it shouldn’t be increased either.

People should switch step by step to native USDC and we should then offboard these versions.

Will also vote No in this case.

[refri]

I like the addition of native USDC but still see a valid place for USDC.e (cause it can be offboarded to eth without slippage). Imo both assets can co-exist long term on Optimism

[Gauntlet]

As an update, the community prefers not to increase supply/borrow caps for USDC.e on V3 Optimism as seen in the snapshot.