Summary
This proposal recommends updating the crvUSD monetary policy parameters as follows:
rate0: from ~11.5% to 5% APRsigma: from 0.019 to 0.008target_debt_fraction: from .26 to 1.0 (max allowable value)
Raw parameter values:
rate0 = 1585489599sigma = 8000000000000000target_debt_fraction = 1000000000000000000
The objective is to reduce borrow-rate pressure on existing users while maintaining sufficiently restrictive conditions to avoid encouraging substantial new borrowing before crvUSD demand and PegKeeper reserve conditions improve further.
Motivation
Current crvUSD borrow conditions appear to be above a critical threshold at which borrowers tend to repay debt rather than maintain or expand positions. This dynamic is occurring even while crvUSD has broadly held around peg.
That apparent stability should be interpreted with some caution. PegKeeper reserves are currently depleted, which means peg support is more fragile than usual. In this environment, maintaining excessively high borrow rates risks creating a self-reinforcing contraction in crvUSD debt supply without a corresponding improvement in the protocol’s structural peg footing.
The goal of this proposal is therefore to establish a middle ground:
- low enough that existing borrowers are not unnecessarily squeezed into repayment,
- high enough that new borrowing is not strongly incentivized under present conditions.
In other words, this is not a proposal to re-accelerate crvUSD credit expansion immediately. It is a proposal to relieve excessive pressure on current borrowers while preserving cautious monetary conditions until the system’s demand base and PegKeeper capacity recover further.
Background on the Rate Policy
The crvUSD mint-market policy rate can be represented, up to notation differences, as an exponential function of:
- deviation of crvUSD from peg, and
- a PegKeeper-debt share term,
scaled by a base equilibrium rate parameter, rate0.
r = \text{rate0}\cdot \exp\left(\frac{\text{price}_{peg}-\text{price}_{crvUSD}}{\sigma}-\frac{\text{PegKeeperDebt}}{\text{TargetFraction}\cdot \text{TotalDebt}}\right)
Holding other variables constant, changing only rate0 scales the resulting policy rate linearly:
\frac{r_{new}}{r_{old}} = \frac{\text{rate0}_{new}}{\text{rate0}_{old}}
This property is useful because it allows governance to reduce the general rate burden on borrowers without otherwise changing the overall structure of the policy response.
The proposed change to sigma also matters. Lower sigma makes the borrow-rate curve steeper as crvUSD trades below peg, preserving a meaningful under-peg penalty even with a lower base rate. This helps maintain discipline around adverse peg conditions while avoiding an unnecessarily elevated base level when crvUSD is near peg.
Borrow rate behavior relative to peg when rate0 is 5% and sigma is 0.008
Setting target_debt_fraction to its maximum weakens the PegKeeper-debt tightening term relative to the current configuration. That is appropriate in the present context because PegKeeper reserves are already empty, and current policy should focus more on avoiding excessive squeeze on existing borrowers than on imposing additional penalty through depleted PegKeeper balance conditions.
Why 5% APR is an Appropriate Middle Ground
A 5% rate0 appears to be a reasonable compromise between two competing goals:
- reducing borrower pressure from the current regime, and
- remaining above prevailing borrowing conditions across most competing venues.
Across ETH- and BTC-based collateral markets on Ethereum, the current competitive range for borrowing USD stablecoins is generally materially below the current crvUSD rate environment. In most of the observed markets, competing net borrow APYs cluster around roughly 2% to 5%, whereas crvUSD mint markets are currently closer to 10% or higher in net borrower cost.
That places crvUSD at a clear competitive disadvantage and likely contributes to debt contraction as borrowers migrate, repay, or avoid reopening leverage.
At the same time, matching the lowest market rates too quickly would not be appropriate under current conditions. crvUSD still needs stronger supply sinks and healthier PegKeeper reserves before governance should aim to stimulate renewed borrowing demand aggressively.
A 5% base rate therefore serves as a middle ground:
- materially lower than the present rate regime,
- still above most prevailing market borrow conditions,
- supportive of borrower retention,
- but not so low as to invite strong expansion in leverage before the broader crvUSD market footing is more robust.
See Competitive Market Analysis here
Competitive Snapshot Analysis
WETH Collateral
| Rank | Protocol | Net APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | SparkLend | -1.34% | multi_collateral | MakerDAO ecosystem lending market |
| 2 | Morpho | -2.85% | multi_collateral | P2P optimization on top of lending pools |
| 3 | Dolomite | -3.20% | isolated_lending | Isolated margin lending pairs |
| 4 | Inverse Finance FiRM | -3.54% | mint_collateral | Minting system for DOLA stablecoin |
| 5 | Sky Lending | -4.56% | multi_collateral | Maker ecosystem lending |
| 6 | UwU Lend | -5.02% | multi_collateral | Fork-style lending market |
| 7 | QiDao | -8.33% | mint_collateral | MAI stablecoin CDP system |
| 8 | crvUSD | -10.09% | mint_collateral | Curve stablecoin mint market |
| 9 | Fraxlend | -11.20% | isolated_lending | Pairwise isolated lending |
Source: DefiLlamma Borrow Aggregator
A snapshot of Ethereum lending markets for borrowing USD stablecoins against WETH shows that most lending venues cluster between -3% and -6% net borrow APY.
In contrast, the crvUSD mint market currently offers -10.09% net APY, placing it near the bottom of the distribution across Ethereum markets.
Even when compared exclusively to other stablecoin minting systems (Inverse FiRM and QiDao), crvUSD currently exhibits the least competitive borrowing conditions in this snapshot.
wstETH Collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | Fluid | -2.42% | multi_collateral | Aggregated liquidity lending markets |
| 2 | Morpho | -2.52% | multi_collateral | P2P optimized lending |
| 3 | SparkLend | -2.64% | multi_collateral | Maker ecosystem lending |
| 4 | Inverse Finance FiRM | -3.54% | mint_collateral | DOLA stablecoin mint system |
| 5 | dForce | -4.07% | multi_collateral | Pooled lending markets |
| 6 | Sky Lending | -5.00% | multi_collateral | Maker ecosystem lending |
| 7 | Frankencoin | -1.18% | mint_collateral | CDP-style stablecoin minting |
| 8 | Dolomite | -3.55% | isolated_lending | Isolated margin lending |
| 9 | Fraxlend | -0.82% | isolated_lending | Pairwise lending markets |
| 10 | crvUSD | -10.41% | mint_collateral | Curve LLAMMA mint market |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against WSTETH shows that most lending venues cluster roughly between -2.4% and -5.0% net borrow APY. In contrast, the crvUSD mint market currently offers -10.41% net APY, placing it near the bottom of the distribution across Ethereum markets.
Relative to alternative lending venues such as Fluid, Morpho, and SparkLend, borrowing stablecoins through crvUSD against WSTETH is therefore substantially less competitive in this snapshot, with borrowing costs roughly 5–8 percentage points below the prevailing market range.
sfrxETH Collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | Fraxlend | -6.73% | isolated_lending | Pairwise lending markets |
| 2 | crvUSD | -10.41% | mint_collateral | Curve LLAMMA mint market |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against SFRXETH shows that the limited number of available venues cluster around -6.7% net borrow APY. In contrast, the crvUSD mint market currently offers -10.41% net APY, placing it materially below the only comparable lending venue in this snapshot.
Relative to the Fraxlend SFRXETH lending market, borrowing stablecoins through crvUSD is therefore approximately 3.7 percentage points less competitive, indicating that the crvUSD mint market currently provides less attractive borrowing conditions for this collateral as well.
weETH Collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | Fluid | -0.21% | multi_collateral | Aggregated liquidity lending |
| 2 | Morpho | -2.12% | multi_collateral | P2P optimized lending markets |
| 3 | SparkLend | -2.51% | multi_collateral | Maker ecosystem lending |
| 4 | Dolomite | -3.55% | isolated_lending | Isolated margin lending |
| 5 | Gravita Protocol | -8.00% | mint_collateral | GRAI stablecoin minting |
| 6 | Radiant Capital | -7.62% | multi_collateral | Cross-chain pooled lending |
| 7 | crvUSD | -10.66% | mint_collateral | Curve LLAMMA mint market |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against WEETH shows that most lending venues cluster roughly between -0.2% and -3.6% net borrow APY. In contrast, the crvUSD mint market currently offers -10.66% net APY, placing it near the bottom of the distribution across Ethereum markets.
Relative to alternative lending venues such as Fluid, Morpho, and SparkLend, borrowing stablecoins through crvUSD against WEETH is therefore substantially less competitive in this snapshot, with borrowing costs roughly 7–10 percentage points below the prevailing market range.
WBTC Collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | Morpho | -2.63% | multi_collateral | P2P-optimized lending markets |
| 2 | Fluid | -3.08% | multi_collateral | Aggregated liquidity lending system |
| 3 | Inverse Finance FiRM | -3.54% | mint_collateral | DOLA stablecoin minting system |
| 4 | Dolomite | -3.60% | isolated_lending | Isolated margin lending markets |
| 5 | dForce | -3.95% | multi_collateral | Pooled lending markets |
| 6 | UwU Lend | -4.38% | multi_collateral | Aave-style lending fork |
| 7 | QiDao | -8.33% | mint_collateral | MAI CDP stablecoin system |
| 8 | crvUSD | -10.80% | mint_collateral | Curve LLAMMA mint markets |
| 9 | Fraxlend | -34.01% | isolated_lending | Pairwise lending markets |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against WBTC shows that most lending venues cluster roughly between -2.5% and -4.5% net borrow APY. In contrast, the crvUSD mint market currently offers -10.80% net APY, placing it near the bottom of the distribution across Ethereum markets. Even when compared exclusively to other stablecoin minting systems (such as Inverse Finance FiRM and QiDao), crvUSD currently exhibits the least competitive borrowing conditions in this snapshot, suggesting that borrowing against WBTC through crvUSD is currently significantly less attractive relative to most alternative venues.
tBTC collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | SparkLend | -2.35% | multi_collateral | Maker ecosystem lending market |
| 2 | Morpho | -2.89% | multi_collateral | P2P optimized lending markets |
| 3 | Fluid | -3.05% | multi_collateral | Aggregated liquidity lending system |
| 4 | crvUSD | -10.93% | mint_collateral | Curve LLAMMA mint market |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against TBTC shows that most lending venues cluster roughly between -2.3% and -3.1% net borrow APY. In contrast, the crvUSD mint market currently offers -10.93% net APY, placing it far outside the typical range observed across Ethereum markets. Relative to other lending venues supporting TBTC collateral—such as SparkLend, Morpho, and Fluid—borrowing through crvUSD is therefore currently significantly less competitive, with borrowing costs roughly 7–8 percentage points lower than the prevailing market range in this snapshot.
cbBTC collateral
| Rank | Protocol | Net Borrow APY | Lending Model | Notes |
|---|---|---|---|---|
| 1 | Frankencoin | -0.84% | mint_collateral | CDP-style stablecoin system |
| 2 | SparkLend | -2.53% | multi_collateral | Maker ecosystem lending market |
| 3 | Morpho | -2.66% | multi_collateral | P2P optimized lending |
| 4 | Fluid | -2.87% | multi_collateral | Aggregated liquidity lending |
| 5 | Dolomite | -3.37% | isolated_lending | Isolated margin markets |
| 6 | Inverse Finance FiRM | -3.54% | mint_collateral | DOLA minting system |
| 7 | Radiant Capital | -8.53% | multi_collateral | Cross-chain pooled lending |
| 8 | crvUSD | -10.93% | mint_collateral | Curve LLAMMA mint market |
A snapshot of Ethereum lending markets for borrowing USD stablecoins against CBBTC shows that most lending venues cluster roughly between -2.5% and -3.5% net borrow APY. In contrast, the crvUSD mint market currently offers -10.93% net APY, placing it well outside the typical range observed across Ethereum markets.
Relative to alternative lending venues such as SparkLend, Morpho, and Fluid, borrowing stablecoins through crvUSD against CBBTC is therefore substantially less competitive in this snapshot, with borrowing costs roughly 7–8 percentage points below the prevailing market range.
Categorical Summary
ETH-based markets (WETH, WSTETH, WEETH, SFRXETH)
Across Ethereum lending venues, borrowing USD stablecoins against ETH-based collateral typically clusters between ≈ -2% and -5% net borrow APY. In contrast, the crvUSD mint markets consistently exhibit substantially lower net borrowing rates, generally around ≈ -10%, placing them at the bottom of the observed distribution across comparable Ethereum venues. This suggests that borrowing stablecoins through crvUSD against ETH-derived collateral is currently materially less competitive than most alternative lending markets.
BTC-based markets (WBTC, TBTC, CBBTC)
A similar pattern emerges across Bitcoin-based collateral. Borrowing USD stablecoins against BTC-type assets on Ethereum generally clusters around ≈ -2.5% to -4.5% net borrow APY, with the tightest ranges often near ≈ -3%. By comparison, the crvUSD mint markets exhibit borrowing rates around ≈ -10% to -11%, again positioning them at the lower end of the market distribution. Even relative to other stablecoin minting systems, the crvUSD borrowing conditions appear meaningfully less competitive in the current snapshot.
Implied Competitive Rates
We calculate asset implied and category implied rate using the following formula:
\text{Implied new rate0 raw} = \text{Current rate0 raw}\times \frac{\text{Target competitive APY}}{\text{Current crvUSD APY}}
with current rate0 raw = 3,662,480,974 and the fact that the policy rate scales linearly with rate0.
Asset-Implied Target rate0
| Collateral | Current crvUSD Net APY | Competitive Target Used | Implied new rate0 raw (blockchain value) | Approx APR | Approx APY |
|---|---|---|---|---|---|
| WETH | 10.09% | 4.5% midpoint | 1,630,000,000 | ~5.15% | ~5.28% |
| wstETH | 10.41% | 3.7% midpoint | 1,300,000,000 | ~4.11% | ~4.20% |
| weETH | 10.66% | 1.9% midpoint | 650,000,000 | ~2.05% | ~2.08% |
| sfrxETH | 10.41% | 6.73% comparator | 2,370,000,000 | ~7.47% | ~7.76% |
| WBTC | 10.80% | 3.5% midpoint | 1,190,000,000 | ~3.75% | ~3.82% |
| tBTC | 10.93% | 2.7% midpoint | 900,000,000 | ~2.85% | ~2.89% |
| cbBTC | 10.93% | 3.0% midpoint | 1,010,000,000 | ~3.16% | ~3.21% |
Category-Level Targets
ETH-based collateral
(WETH, wstETH, weETH, sfrxETH)
Asset-implied range: 1.9% to 6.73%
| Target | rate0 raw (blockchain value) | APR | APY |
|---|---|---|---|
| Balanced | 1,300,000,000 | ~4.1% | ~4.2% |
| Conservative | 1,500,000,000 | ~4.7% | ~4.8% |
BTC-based collateral
(WBTC, tBTC, cbBTC)
Asset-implied range: 2.7% to 3.5%
| Target | rate0 raw (blockchain value) | APR | APY |
|---|---|---|---|
| Balanced | 1,000,000,000 | ~3.15% | ~3.2% |
| Conservative | 1,100,000,000 | ~3.47% | ~3.53% |
Conclusion
This proposal should be understood as a temporary recalibration to support orderly stabilization and borrower retention during a period of incomplete market recovery. On balance, reducing rate0 to 5% APR while setting sigma = 0.008 and target_debt_fraction = 1.0 appears to strike an appropriate balance for current market conditions.
The change would relieve excessive pressure on existing borrowers, improve crvUSD’s relative competitiveness, and reduce the risk of unnecessary debt contraction. At the same time, it would preserve a meaningful under-peg penalty and keep policy conditions sufficiently firm that governance is not prematurely encouraging strong new borrowing before crvUSD demand and PegKeeper reserve conditions have improved further.
Governance should continue to prioritize medium-term work that improves structural demand for crvUSD and restores the health of peg-support mechanisms, including:
- strengthening crvUSD supply sinks,
- improving organic demand to hold and use crvUSD,
- enabling PegKeeper reserves to refill,
- and restoring conditions under which more competitive borrowing can be safely supported.
As those conditions improve, governance may later revisit monetary policy again from a stronger footing.