The DeFi platform MakerDAO community voted to remove Aave from the direct deposit module. The decision was made by Celsius Network’s withdrawal of 100 million DAI secured by stETH using a crypto loan project.

Due to market conditions, Producer Management voted to disable it @AaveAave D3M.

According to the Urgent Signal Request issued on the recommendation of the Risk Core Unit, this is a preventative measure against potentially unacceptable risks for the Generator Protocol.

— Producer (@MakerDAO) 17 June 2022

The initiative will effectively eliminate the ability for Aave users to borrow DAI using “stock of his work” in Lido Finance as collateral.

“The reason we see this as a risk is that half of the 200 million DAI borrowed from Aave is in Celsius and is primarily backed by stETH. […] Risk of infection increases in DeFi”— Written by one of the members of the risk management team at MakerDAO.

Forced liquidation of Celsius position in Aave could result in additional sale of stETH and jeopardize the return of borrowed DAI.

The decision will be reviewed on 1 July.

According to Bloomberg, to mitigate the risks associated with stETH, Aave has proposed to MakerDAO to freeze transactions with the token and raise the liquidation threshold from 81% to 90%. The proposed measures in the DeFi platform community were called “unacceptable risk” and developed their own solutions.

On June 13, crypto lending platform Celsius suspended withdrawals, swaps and transfers between accounts “due to extreme market conditions”. The project token reacted with a 50% drop.

The network also reported that Celsius has hired Citigroup to explore possible financing options, while prominent investors have shown no desire to bail out the company.

Recall that Georgetown University law professor Adam Levitin described Celsius’ bankruptcy as almost inevitable.

Earlier, the expert identified a potential scenario for ForkLog to destabilize the DAI rate.

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