Decentralized lending protocol Aave has finalized a plan to remove the BUSD stablecoin from its lending and borrowing market.
A snapshot of a governance vote to offboard BUSD revealed that the Aave community was nearly unanimously in favor. The vote ended on Mar. 9 with 99.99% of users opting for the plan using 686,000 AAVE tokens.
The finalized plan was formulated by Marc Zeller, a former integrations lead at Aave and the co-founder of the Aave-Chain Initative (ACI). The proposal called for offboarding BUSD from the Aave v2 market on Ethereum by reducing its liquidity in order to encourage users to switch to other stablecoins.
Essentially, the cost of borrowing BUSD would go up, while the rewards for providing liquidity would go down, incentivizing users to put their money elsewhere.
ACI’s analysis of vBUSD debt token holders on the platform found that most of the top positions are comprised of active addresses that would be able to manage their positions accordingly.
AIP created, vote start tomorrow pic.twitter.com/YiheVLSHhh
— Marc Zeller 👻 💜 🦇🔊 (@lemiscate) March 9, 2023
The necessary changes to BUSD’s risk parameters will be enforced through a single Aave Improvement Proposal (AIP), with voting set to commence on Mar. 10.
The decision to offboard BUSD entirely follows a proposal executed last month, which froze the BUSD reserve on Aave’s v2 Ethereum pool. The motivation behind these decisions stems from the Binance-branded stablecoin’s issuer Paxos being ordered to stop minting BUSD.
“As there’s no real prospect of growth and the inability to mint new BUSD might hurt peg arbitrage opportunity and asset peg,” said Zeller at the time.