MakerDAO Restricts Aave’s DAI Supply Over Celsius Concerns

MakerDAO Restricts Aave’s DAI Supply

MakerDAO has voted to remove Aave’s ability to generate Dai for its lending without collateral to mitigate the impact of the battered Celsius Network.

Celsius Network reportedly invested a significant amount of user funds in stETH, which was why it stopped withdrawals.

A governance proposal released on Tuesday from DAO member prose 11 notes that the Maker protocol should temporarily disable the DAI Direct Deposit Module D3M for Aave.

Celsius borrowed 100 million in DAI that is collateralized by stETH, which faces liquidation risks if Celsius Network fails.

The D3M enables Aave to stabilize the DAI loan interest by offering liquidity when required. Aave’s D3M comprises 200 million DAI, where 100 million have been borrowed by Celsius.

The current trend is causing speculations that if Celsius collapses, it will result in stETH sell-off for the protocol to meet retail obligations, causing a depeg of stETH.

sETH is a token that represents the amount of ETH that is staked on the Lido staking protocol. Its peg to the Ether has been volatile for several weeks and is currently trading 6% below the price of ETH.

Source: Twitter 

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