Moonwell Proposes Rate Cuts Amid Bad Debt Woes
Moonwell, a lending protocol in DeFi, has proposed changes to its market risk settings and interest-rate models as part of its recovery efforts following an incident on August 27. According to Anthias Labs' projection, these rate changes could reduce monthly interest accruing on bad debt by about 85%, cutting it from $338,785 to $50,273.
The proposal, MIP-X66, has entered its vote collection period and combines changes to market risk settings, interest-rate models, and the use of protocol reserves to recapitalize the USDC market. The reserve component proposes withdrawing available protocol reserves on Base and OP Mainnet for conversion to USDC and recapitalization.
Moonwell emphasized that these withdrawals would apply only to protocol-owned assets, without withdrawing or transferring user funds. However, borrowers face another condition: Moonwell said MIP-X66 could help establish the conditions to consider reopening Base borrowing, but any re-enablement would remain subject to further risk assessment.