Community Call Treasury Tuesday - March 14, 2023

This week the Treasury team reviewed proposals and explained recent events, including the Silicon Valley Bank collapse, the USDC de-peg, Biden's tax bill, and the Euler protocol hack.

Rook branding with gold geometric figure; recap by Starbased
Treasury Tuesday calls are open-invite meetings to drive the strategy, risk management, and overall discussion for all aspects relating to the Rook DAO Treasury.

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View the agenda for this event.

News and Recent Events

  • Silicon Valley Bank, Silvergate, and Signature Bank collapsed over the weekend, and are now under FDIC control. These banks were notable crypto-friendly banking partners for a number of companies, including Circle (the issuer behind USDC), which led to a de-peg of the stablecoin. Further discussion below.
  • A lawsuit against KuCoin by the NY Attorney General claims that tokens, including ETH, are securities. These arguments do not set any precedent on their own, but it will be important to follow the case as it progresses.
  • Silk Road BTC is on the move, and can be tracked at the wallet controlled by the US Department of Justice.
  • Biden’s recently introduced tax bill includes changes that would affect the crypto industry and investors, including a 30% tax on BTC mining, doubling the capital gains tax rate to 40%, and restricting the crypto wash trading loophole.
  • Euler protocol was hacked to the tune of $200B. Rook is not directly affected.

Proposals Currently With the Sophons [5:06]

  • KIP-36 - Expand Funding and Strategies of Testing Wallet: Originally $600K was allocated to the testing wallet effort. Due to the success in generating yield, an additional $400K in DAI funding is being requested.
  • KIP-38 - Replenish Discretionary Investment Limit Funds: This gives the treasury the ability to quickly react to and take advantage of market opportunities in a non-public manner. This proposal would replenish the cap to the lesser of $5M or 5% of the treasury’s notional value.
  • KIP-39 - Deployment of Additional ETH for Yield Generation: The ETH yield generation experiment has been successful, so there is a desire to increase the limit to 80% of idle ETH.

Treasury Proposals [6:10]

  • Draft: Treasury Yield Management for USDC via USV - This proposal suggests investing 20% of the Rook DAO Treasury USDC holdings in Phuture’s USDC savings vault (USV).
  • Draft: The Origin team has introduced the OUSD Treasury Utilization Proposal. In order to reduce risk, Origin monitors circulating supply, redemptions, liquidity, and the borrow rates on Aave and Compound. Members of the Origin team joined a recent Treasury Tuesday call to provide more color on the proposal and answer questions (see the Rookbase recap).
  • Labs Budget Request - This proposal has been updated to include Q2, and is important in order for Rook Labs to continue operations.

Voting Active [8:30]

  • KIP-37 - Discretionary Swapping of Like-Kind Assets: Currently, the treasury must go through the slow governance process to swap like-kind assets. This proposal would mitigate risk by giving the treasury the discretion to swap between stablecoins, Ethereum/ETH derivatives, and Bitcoin/BTC derivatives.

Silicon Valley Bank Collapse [12:31]

  • Crypto has been scapegoated by some as the reason behind the SVB collapse, but the primary cause was a duration mismatch between short-term deposits and long-term maturity of investments made by the bank.
  • Many billions of dollars of capital flowed into SVB, which in turn invested those deposits into government-backed securities. However, the returns on these securities are inversely related to interest rates – as rates increased, returns dropped. As news of this potential insolvency spread, the bank’s reserves were insufficient to meet the rapid influx of withdrawal requests, resulting in further panic and a bank run.
  • SVB was also somewhat unique in that its depositor base was overweighted with larger customers who had individual accounts above the $250K FDIC limit.
  • Circle was able to successfully mitigate any loss, and USDC has returned to peg.

Initiative Collaboration [24:57]

  • This week’s Rook DAO Treasury Report is now available.
  • The team discussed stablecoin rebalancing.
  • Last week, the community was joined by Iconium Blockchain Ventures to advocate for their proposal to improve the ROOK token model (see the Rookbase summary). This hotly debated discussion covered tokenomics changes to increase the value of the ROOK token. Opinions differed on the subject, spurred by concerns over unclear securities regulations about revenue-sharing models and historical evidence that buy-backs have not made a lasting impact on token price. One Sophon, Pai-Sho, has expressed strong opposition to the proposal. This discussion is likely to be revisited in the future.