Objective

To shut down the jEUR Credit Lines on Polygon in order to reduce the depeg.

Background

The jEUR Credit Lines were deployed to meet the demand for jFIATs when the buying-side liquidity on the protocol's pools was depleted. These credit lines allowed users to acquire jFIATs by borrowing them from the protocol, with a debt ceiling set at half of the jFIATs bought from the pools to avoid depleting the liquidity.

However, with the advent of the bull market, jFIAT holders sold jFIATs to buy volatile assets, leading to users borrowing jFIATs and selling them for leverage trading. This behavior has emptied the protocol's reserves across all networks, resulting in an inability to redeem jEUR for USDC which worsen the situation on due to bad debt.

The jEUR Credit Lines have historically provided significant value to users by offering a low borrowing cost of 0.5% compared to the current 10-20% on USDC elsewhere. This has saved users approximately 20K per year. The protocol has already provided a lot of value to these users, and we now request that they return the favor by repaying their debts.

Proposal Details

Shutting Down Credit Lines:

We propose shutting down jEUR Credit Lines on Polygon The current borrowed amounts are approximately 233k jEUR.

Implementation Timeline:

A communication campaign will be launched to inform borrowers about the shutdown.

After the 4-weeks period, the Credit Lines will enter a redeem mode, allowing anyone to repay the debt of a borrower in exchange for the equivalent value of their collateral at the oracle price at the time of shutdown.

Step-by-Step Process:

• Week 1-4: Announce the shutdown.
• End of Week 4: Officially shut down the Credit Lines.
• Post-shutdown: Enable the redeem mode for repayment and collateral withdrawal.

Rationale

The jEUR Credit Lines have historically provided significant value to users by offering a low borrowing cost of 0.5% compared to the current 8-15% on USDC elsewhere. This has saved users approximately 20K per year. However, the current market dynamics and the resulting depletion of protocol reserves necessitate a change.

Shutting down the Credit Lines will help with reducing the depeg on the jEUR on Polygon.

Unlike with the shutting down of the Credit Lines on other network, no incentives are needed since the depeg of jEUR provides suffisent incentives to repay the loans.

Incentive for Repayment: To encourage repayment, we can incentivize borrowers to repay within a 4-week timeframe.

Borrowers will be incentivized with a 4.5% reward in JARVIS tokens, which amounts to a maximum of $11.3K if all 252K jEUR is repaid within 4 weeks.

Implementation

Communication Plan:

• Inform the community and borrowers about the shutdown via official channels.
• Provide clear instructions and deadlines for repayments.

Future Plans:

Deploy a new money market on Base during the summer using Morpho Blue and the CCIP bridge from Chainlink to replace the Credit Lines.

Stakeholders

• Borrowers: Will need to repay their jEUR loans within the 4-week period or face the redeem mode.
• jEUR holders: Will be able to exit their jEUR position at a higher price, closer to the peg.

Metrics

Amount of jEUR repaid during the incentive period. Liquidity levels in the pools post-shutdown. Revenue generated from replenished pools and new LP participation.

Budget Maximum of $11.3K in JARVIS tokens for repayment incentives.

Conclusion

This proposal aims to shut down the jEUR Credit Lines on Polygon to help reducing the depeg.

#Voting Options:

• Yes, without incentives: Approve the shutdown of jEUR Credit Lines.
• Yes, with incentives: Approve the shutdown of jEUR Credit Lines and incentivize borrower to repay within 4 weeks.
• No: Reject the proposal and maintain the current state.