Summary
This proposal is the first governance action flowing from the RWG’s Complete Risk Refresh Assessment of USDe/sUSDe Collaterals on FiRM. It seeks to execute the first stage of the RWG’s phased sUSDe collateral transition proposed in the assessment. Three changes take effect simultaneously: the standalone sUSDe market is offboarded by reducing its supply ceiling to zero; the collateral factor on FiRM’s two FeedSwitch-protected sUSDe LP markets (DOLA/sUSDe LP and yv-sUSDe/DOLA) is reduced from 92% to 91.5%; and market ceilings are brought in line with current borrow utilization — DOLA/sUSDe LP to $50M and yv-sUSDe/DOLA to $5M. The existing 100% liquidation factor and 4% liquidation incentive is preserved on both LP markets.
Background
FiRM currently operates three sUSDe-denominated markets. The two LP markets — DOLA/sUSDe LP and yv-sUSDe/DOLA — are protected by FeedSwitch V2, which prices sUSDe at USDT-equivalent in its default configuration. A standalone sUSDe market with a $5M ceiling and zero active borrowers operates outside FeedSwitch coverage, pricing directly against the live Chainlink sUSDe-USD DEX-state feed.
The RWG’s Complete Risk Refresh Assessment documents five converging risk vectors across the sUSDe collateral stack. The structural finding central to this proposal is a 74% contraction in sUSDe DEX liquidity (ex-DOLA) since January 2026 — from $109M at FeedSwitch deployment to $28.34M as of April 20, 2026. This is the liquidity environment that underpins both the Chainlink sUSDe-USD feed and every FiRM liquidation path for sUSDe collateral. The 92% CF and the current market ceilings were calibrated against the January environment. They no longer reflect the conditions under which the protocol is operating.
The three changes in this proposal are addressed together because they belong together. The standalone market’s offboarding is a consolidation step — it removes a surface with zero borrowers and no FeedSwitch protection, focusing the remaining plan on the two markets where the FeedSwitch actually operates. Ceiling alignment with current borrow utilization closes the gap between structural ceiling and actual exposure, removing headroom that serves no function during a managed transition window. The CF reduction is the substantive risk adjustment — the first of two 0.5% steps that will bring the LP markets to 91% CF ahead of any feed configuration decision.
Why Now
The LP markets were parameterized at 92% CF against +$100M in independent exit liquidity. That pool depth is now roughly one-quarter of the environment the current parameterization was calibrated against. The Chainlink sUSDe-USD feed derives its price exclusively from on-chain DEX pools; feed behavior under stress is inseparable from the depth of the pools it sources from. Despite the recency of the October 2025 event, the current depth of $28M has no stress-tested performance record, and a comparable event would hit an environment with roughly 4× less absorbing capacity.
The FeedSwitch currently insulates LP market borrowers from real-time sUSDe price exposure. It was deployed as a temporary guardian-controlled buffer pending a trustless, PoR-driven automated fallback. That fallback has not materialized, and the current environment makes the interim posture progressively less defensible. Maintaining the FeedSwitch requires a named guardian to monitor, judge, and execute faster than a stress event deteriorates — a reactive model whose correctness is required exactly when the conditions for exercising judgment are most adverse. Even if exercised perfectly, guardian activation is still a reaction to an underlying problem already in motion and therefore cannot substitute for appropriate parameter sizing against the actual liquidity environment. Maintaining a 92% CF and ceilings unconstrained by utilization against a 74%-contracted liquidity picture is not consistent with the RWG’s collateral framework.
The RWG will conduct direct outreach to active sUSDe LP borrowers ahead of execution, consistent with prior parameter-change communications.
Proposed Changes
| Market | Parameter | Current | Proposed |
|---|---|---|---|
| Standalone sUSDe | Supply Ceiling | $5,000,000 | $0 |
| DOLA/sUSDe LP | Collateral Factor | 92% | 91.5% |
| DOLA/sUSDe LP | Supply Ceiling | $80,000,000 | $50,000,000 |
| yv-sUSDe/DOLA | Collateral Factor | 92% | 91.5% |
| yv-sUSDe/DOLA | Supply Ceiling | $20,000,000 | $5,000,000 |
Liquidation incentive preserved at 4% on both LP markets. FeedSwitch configuration unchanged. No changes to LF or daily borrow limits.
Combined sUSDe notional ceiling: $105M → $55M. Total ceiling reduction reflects consolidation to the two FeedSwitch-protected LP markets at utilization-appropriate levels.
Looking Ahead
If Stage 1 is approved via governance, Stage 2 — a second 0.5% CF reduction from 91.5% to 91% — is targeted approximately 30 days after this proposal executes, giving borrowers adequate time to adjust before the next step. During the Stage 1 observation window, the RWG continues structured data collection on Chainlink sUSDe-USD feed performance and sUSDe DEX TVL trajectory, and conducts engagement with Ethena on Season 6 status, sENA fee-switch activation timing, and forward guidance on the DEX-liquidity outlook.
If deemed necessary, Stage 3 — a data-driven ceiling reassessment and FeedSwitch configuration review — follows approximately 30 days after Stage 2, with a hard outer bound of June 26, 2026. It is a window, not a fixed execution date. The full rationale is set out in the Stage 3 proposal.
The RWG pre-commits to timeline acceleration under either of two conditions: sUSDe DEX TVL (ex-DOLA) sustained at $10M or below over a continuous one-week window, or confirmed migration of Aave’s sUSDe oracle across any of its Ethereum deployments from USDT-equivalent to live market pricing.