Curve DAO's Targeted Lending Initiative to Strengthen Stablecoin Stability and Boost Earnings

The Curve DAO is preparing to decide on a proposal from Resupply, a lending protocol utilizing Llamalend, which suggests minting 5 million crvUSD and directing it to the sreUSD LlamaLend market. This plan is designed to boost liquidity and balance the relationships among Curve’s stablecoins—reUSD, sreUSD, and crvUSD—while also generating a fresh income stream for the DAO, as detailed in a

Resupply enables users to borrow reUSD by supplying crvUSD to Curve’s lending pools, but has struggled with reUSD consistently trading below its $1 target due to ongoing sell-offs. To counteract this, the protocol introduced sreUSD, a yield-generating version that shares in platform earnings. Despite this, the imbalance remains, highlighting the need for deeper changes. By adding 5 million crvUSD to the sreUSD market, the proposal aims to expand borrowing opportunities, decrease interest rates, and ease the downward pressure on reUSD. This would allow users to increase their leverage without needing to sell reUSD, thereby reestablishing the protocol’s intended leverage function.

The strategy relies on the distinct characteristics of lending markets, which follow their own monetary policies independent of crvUSD’s market value. This separation provides more reliable revenue compared to traditional PegKeeper systems, which are more vulnerable to price swings. For Curve, this approach offers a stable income stream: with the current 8.1% supply APR for crvUSD in the sreUSD market, the DAO stands to earn about $405,000 per year from this allocation. The setup also promotes transparency, as earnings from Llamalend lending can be claimed by DAO members without restrictions.

Security and governance are key priorities in this proposal. The smart contracts, created by Resupply and reviewed by Electi and ChainSecurity, will remain entirely under Curve’s authority. Any future changes—such as increasing the minted supply or expanding into additional markets—would need approval from the DAO, ensuring decisions reflect the community’s interests.

This proposal is part of a larger movement in DeFi, where protocols are increasingly adopting lending solutions to maximize capital efficiency. By building on Llamalend’s framework, Curve seeks to reinforce its role in the stablecoin sector and broaden its revenue base. The result of the vote will determine if this approach sets a precedent for future partnerships between lending protocols and stablecoin platforms.