Gauntlet has reviewed Objective Labs’ proposal to delist FDUSD, wUSDM, wUSDL, and expired PTs from Euler Yield. We are aligned with all of these removals, given:
- FDUSD is an effectively frozen state with zero lingering supply and borrow. Its depeg event below 95 cents does not inspire confidence in its safety as an asset in this particularly low risk market.
- wUSDM is vulnerable to ERC4626 exchange rate attacks, as referenced by Objective Labs. It never achieved more than 6% supply cap utilization with a 5M cap, and usage fell to nearly zero before it was disabled as collateral following the Venus attack.
- wUSDL never achieved more than 12% supply cap utilization with a 5M cap, and usage fell to nearly zero before it was also disabled as collateral following the Venus attack. As a matter of risk, delisting low usage assets also helps to lower operational burden, especially given Euler’s pairwise LTV mechanism.
- In addition to low smart contract risks, accumulating expired PT vaults leads to increased operational overhead for risk managers.
FDUSD, wUSDM, wUSDL, PT-USD0+±30JAN2025, and PT-USD0+±27MAR2025 have no present usage as collateral and have no borrows. PT-sUSDE-27MAR2025 has one small collateral position of ~$20, alongside ~$195 of other assets to borrow ~$75 of sUSDe at a health factor of over 2.5. PT-USDe-27MAR2025 has two collateral positions, one for ~$22.3K against ~$16.8K of USDe, and one for ~$1010 against ~$193 of sUSDS.In accordance with the delisting process discussed in this post, we recommend:
- Set borrow cap to zero.
- Supply cap can not be set to zero due to over-swaps that happen to repay borrows and handle debt accrual between execution time and transaction inclusion time, which we discussed with Euler Labs and Objective Labs. (In this case there are presently zero borrows of delisted assets, but some assets are liable to being borrowed during the timelock period).
- Set all pairwise borrow LTVs with delisted assets to zero where they are not already.
- For delisted assets as collateral:
- FDUSD, wUSDM, and wUSDL have no borrows against them and are not usable as collateral, so their LLTV against debt assets can be set to zero with no deramp period.
- The PTs can have their LLTVs against debt assets set to zero with a 30 day deramp period.
- For delisted assets as debt:
- PTs already are not borrowable and have zero LLTVs as debt.
- FDUSD is not borrowed and is not borrowable, so its LLTV as debt can be set to zero with no deramp period.
- wUSDM and wUSDL can have their LLTVs as debt set to zero with a 30 day deramp period.