In a new emergency executive proposal, leading DeFi platform MakerDAO [MKR] has sought community approval to introduce a debt ceiling breaker for collateral assets used to mint its DAI stablecoin.

This action became necessary after USD Coin [USDC] lost its parity with the U.S. dollar last weekend due to the disclosure that Circle, the issuer, held deposits at Silicon Valley Bank (SVIB). As USDC was a significant collateral backing for DAI, its de-pegging event resulted in a temporary loss of dollar parity for DAI.

With this new proposal, the DeFi protocol aims to implement a mechanism to set the debt ceiling of any collateral type to zero on the Maker protocol. 

By introducing a debt ceiling breaker, MakerDAO aims to handle scenarios where the underlying collateral asset is experiencing substantial volatility. This mechanism would enable MakerDAO to safeguard its liquidity and prevent losses in such situations.

(By Abiodun Oladokun)