Moonwell Proposes Bad Debt Fix, But User Funds Remain Locked
DeFi lender Moonwell is proposing rate changes to reduce bad debt interest accrual by about 85%, according to a recent update. The proposed changes, outlined in governance proposal MIP-X66, aim to cut monthly interest on outstanding bad debt from around $338,785 to $50,273.
Anthias Labs' projection suggests that the rate changes could save around $288,512 per month, or roughly 85% of the current amount. However, even with this reduction, about $50,273 in monthly interest would continue to accrue on outstanding bad debt.
The reserve component of MIP-X66 proposes withdrawing available protocol reserves for conversion to USDC and recapitalization. According to Moonwell, this withdrawal would only apply to protocol-owned assets, without affecting user funds.
Despite these proposed changes, supplier cash and borrowing remain separate issues. Borrowers face another hurdle: any re-enablement of Base borrowing would require further risk assessment and is not guaranteed by the rate changes alone.