Voting on a governance proposal to decrease the USDP debt ceiling from $500 million to zero concluded on Thursday, with voters unanimously in favor of removing Paxos from the reserve asset holdings. A total of 35 voters used a total of 73,249 MKR tokens in the voting process.
The proposal, put forth by Maker risk management firm Monet Supply, reasoned that USDP is relatively less useful for promoting DAI liquidity compared to alternatives like USDC. It also suggested that Maker does not earn revenue on exposure to USDP, which is somewhat of a drag on capital efficiency.
Other stablecoin issuers like Gemini, provides Maker with marketing incentive payments for the Gemini U.S. Dollar (GUSD) held in Maker’s Peg Stability Module (PSM). Maker also stands to earn a portion of the revenue from its USDC holdings from Coinbase Custody.
Earlier this year, Paxos proposed sending Maker a marketing fee equivalent to the Effective Funds Rate on USDP. In exchange, Paxos requested that Maker consider increasing its USDP holdings in the PSM to $1.5 billion.
At the time, Paxos estimated that it would be able to generate an additional $29 million in annual revenue for Maker through the scheme.
“While Paxos has raised the possibility of a marketing fee scheme, to date there has not been concrete progress towards implementing this,” noted Monet Supply on the Maker governance forum.
Moreover, considering Maker holds around half of USDP’s outstanding supply, organic trading volume for the stablecoin is considerably low and the stablecoin is relatively less liquid in centralized and decentralized markets.
In February, the New York State Department of Financial Services (NYDFS) ordered Paxos to cease minting its Binance-branded stablecoin BUSD. Since then, the Paxos-issued stablecoin has lost $11 billion in market cap.
