MakerDAO Votes to Keep Gemini USD in DAI Stablecoin’s Reserves

The result averts near disaster for Gemini’s stablecoin, because MakerDAO holds 85% of all GUSD in circulation.

AccessTimeIconJan 19, 2023 at 4:50 p.m. UTC
Updated Jan 19, 2023 at 7:35 p.m. UTC
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Decentralized-finance (DeFi) giant MakerDAO’s community voted to keep the Gemini USD (GUSD) stablecoin as part of its reserve system for its DAI stablecoin in a dramatic vote that flipped at the finish line.

In a poll that concluded Thursday, 50.85% of the votes favored keeping the GUSD debt ceiling at $500 million level in Maker’s Peg Stability Module (PSM), while 49.15% voted for decreasing to zero. The result means GUSD will remain as a reserve asset for Maker’s $5 billion DAI.

Up until the end of the voting, votes favoring removing GUSD from the PSM led the tally.

Venture capital firm ParaFi Capital seems to have delegated just enough voting power in the last minutes to flip the end result, according to blockchain data and information on MakerDAO’s governance forum.

GFX Labs, the largest delegate in favor of keeping GUSD with 13.9% of all votes, received 10,000 MKR tokens representing 7.5% of all votes in two transactions from a wallet address as the voting was nearing its end. Blockchain analytics firm Nansen identified ParaFi as the owner behind the wallet. Notably, ParaFi is an investor in Gemini.

MakerDAO is led by a decentralized autonomous organization, where holders of the maker (MKR) governance token make decisions by voting on proposals. Token holders can give their voting power to delegates, and votes are weighted by the number of tokens.

According to MakerDAO's governance forum, the largest backer of GFX Labs delegated 10,000 MKR worth $6.6 million in two transactions.
According to MakerDAO's governance forum, the largest backer of GFX Labs delegated 10,000 MKR worth $6.6 million in two transactions.
Data on Nansen profiler shows that the wallet that sent the MKR tokens belongs to ParaFi Capital.
Data on Nansen profiler shows that the wallet that sent the MKR tokens belongs to ParaFi Capital.

“Recent MakerDAO governance discussions have raised concerns about GUSD’s heavy reliance on the PSM and Gemini holding GUSD reserves at Silvergate,” Riyad Carey, an analyst of digital-asset research firm Kaiko, wrote in a report earlier this month, referring to Silvergate Bank, a crypto bank that saw a large outflow of customers' digital-asset deposits in the fourth quarter.

The outcome with the vote averted a near disaster for Gemini’s stablecoin, because 85% of all GUSD in circulation has been held at MakerDAO’s PSM, according to MakerDAO’s DAI stablecoin treasury website.

GUSD is a dollar-pegged stablecoin issued by Gemini, the troubled crypto exchange of mega crypto entrepreneurs Cameron and Tyler Winklevoss. It is ostensibly backed one-to-one by cash and U.S. Treasurys, and it’s regulated by the New York State Department of Financial Services.

The Winklevoss twins’ crypto exchange has already come under pressure after it halted withdrawals from its yield-generating Earn program, which is being sued by the U.S. Securities and Exchange Commission for allegedly selling unregistered securities.

MakerDAO’s treasury earns a 1.25% annual yield for holding GUSD as a reserve asset, which is a substantial revenue stream for the organization.

Update (Jan. 19, 19:35 UTC): Adds detail about ParaFi’s role in voting. Adds analyst comment.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

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