Circle Seeks Emergency Rate Changes to Restore Liquidity in Aave's USDC Pool

Circle has called for an emergency overhaul of interest-rate parameters for the Aave V3 Ethereum core USDC market after the pool remained effectively maxed out for days. According to CoinDesk, utilization in the USDC pool has held at 99.87% for four straight days following the April 18 KelpDAO vulnerability incident. Gordon Liao, Circle's chief economist and a governance participant, said in a Tuesday post that Aave's current rate model is failing to clear the market. The pool currently shows about $1.89 billion in supply against $1.89 billion borrowed, leaving under $3 million in available liquidity. Borrow rates are capped near 14% after earlier volatility. Over the past 24 hours, the market size has contracted by roughly $60 million as queued withdrawals and repayments fully offset each other. Liao proposed raising the Slope 2 parameter for the USDC pool immediately from around 10% to 40% via a Risk Guardian action, then pursuing a governance-approved increase in the target rate to 50% within five to seven days. The tentative maximum utilization rate would drop from 92% to 87%, and would fall to 85% after final approval. Under the proposed target settings, the maximum supply rate at 100% utilization would rise from about 12.6% to 48.2%. Liao argued that some borrowers are using USDC loans to bypass withdrawal queues and are largely indifferent to current rates. He said a 40% to 50% yield could meaningfully pull USDC back from other venues within hours and restore healthier utilization. The proposal also recommends suspending Aave's Slope 2 Risk Oracle for USDC, citing weak performance during the February WETH price spike and noting that its maintainer, Chaos Labs, exited the market on April 6. Circle's move was notable: the stablecoin issuer formally told Aave that the market for its asset had effectively broken down.