Moonwell Proposes Rate Changes to Reduce Bad-Debt Interest by 85%

Moonwell's proposed rate changes could significantly reduce monthly interest accruing on bad debt by about 85%, according to Anthias Labs' projection.

The lending protocol estimates that balances and utilization remaining unchanged would lead to $288,512 less in monthly bad-debt interest. This is based on a reduction from approximately $338,785 to $50,273 in monthly interest, as stated in the governance proposal MIP-X66.

Moonwell's recovery effort follows the Aug. 27 MAMO market incident on Base, which resulted in an estimated $9.1 million in residual borrower obligations, including about 2.35 million USDC in remaining borrower debt.

The proposed changes include withdrawing protocol-owned reserves for conversion to USDC and recapitalization, with the plan excluding transfers of user funds. However, supplier cash access and borrowing remain unverified and subject to further risk assessment.