UIP003 - BUSD Off-Boarding Proposal II

Summary

We propose implementing a reduction of the Loan-to-Value (LTV) ratio for BUSD to reach 0 by January 4, 2024.

Motivation

Effective February 21, 2024, Paxos will cease issuance of new BUSD tokens at the direction of the New York Department of Financial Services (NYDFS). Paxos will allow customers to redeem BUSD for USD or convert their BUSD to Pax Dollar (USDP). Click here to read the Statement from Paxos on BUSD.

The dForce community has granted approval for the wind-down of the BUSD market through DIP052. The wind-down process included the following steps to date:

• Disabling deposits and borrowings for BUSD.
• Adjusting the reserve ratio to 99.9%.
• Reducing the supply/borrow cap to (0, 0).
• Reducing the UR Kirk to 1%.
• Increasing the base to 100%.
• Increasing Slope 1 to 100%.
• Increasing Slope 2 to 300%.

In our ongoing process of phasing out the BUSD market on Unitus, we suggest a gradual reduction of the Loan-to-Value (LTV) ratio for BUSD to 0.

Specification

Ethereum

LTV will be configured to 0 directly.

BSC

We propose implementing this change on a step-down approach, only after the completion of the final shortfall repayment, giving users the opportunity to redeem their BUSD supplies.

To avoid potential liquidations, we recommend that those using BUSD as collateral settle their borrowings and redeem their BUSD holdings before this proposal takes effect.

Date	26 Dec 2023	30 Dec 2023	4 Jan 2024
LTV Ratio	0.5	0.25	0

Based on the current status of BUSD collateralized positions, reducing the LTV to 0.5 will expose ~$3.8k BUSD deposits to liquidation. When the LTV drops to 0, this number will not significantly increase.