I see no reason to believe this proposal will solve the problem. I do believe it will create uncertainty from borrowers regarding the conditions of the collateralized debt positions. If I’m not mistaken, this will be the second time that the purported solution to iUSD depeg was to increase the liquidation risk of borrowers subsequent to them having taken a position. This does not inspire confidence. Once is an anomaly. Twice may be the start of a habit.
In which case, Pandora’s Box will have been opened.