Curve DAO's Strategic Lending Push to Stabilize Stablecoins and Generate Revenue

The Curve DAO is set to vote on a proposal by Resupply, a lending protocol built on Llamalend, to mint 5 million crvUSD and allocate it to the sreUSD LlamaLend market. The initiative aims to enhance liquidity and stabilize the dynamics between Curve's stablecoins—reUSD, sreUSD, and crvUSD—while creating a new revenue stream for the DAO, according to a Lookonchain report. The proposal, currently under a two-day voting period, introduces a novel minting mechanism that bypasses traditional collateralized models in favor of leveraging lending markets.

Resupply, which operates by allowing users to borrow reUSD against crvUSD supplied to Curve's lending markets, has faced challenges with reUSD trading below its $1 peg due to persistent sell pressure. To address this, the protocol launched sreUSD, a yield-bearing variant that captures a portion of platform revenue. However, the imbalance persists, prompting the need for structural adjustments. By injecting 5 million crvUSD into the sreUSD market, the proposal seeks to amplify borrowing capacity, lower interest rates, and reduce reUSD sell pressure. This would enable users to leverage their positions more efficiently without liquidating reUSD, thereby restoring the protocol's core leverage mechanism.

The strategic rationale hinges on the unique properties of lending markets, which operate under independent monetary policies not tied to crvUSD's price. This decoupling allows for steadier income streams compared to traditional PegKeeper mechanisms, which are sensitive to market volatility. For Curve, the move introduces a predictable revenue source: based on the current 8.1% supply APR for crvUSD in the sreUSD market, the DAO could generate approximately $405,000 annually from the allocation. Additionally, the structure ensures transparency, as profits from Llamalend lending are permissionlessly claimable by DAO members.

Security and governance remain central to the proposal. The smart contracts, developed by Resupply and audited by Electi and ChainSecurity, are designed to remain under Curve's full control. Any future adjustments—such as increasing the minted amount or expanding to new markets—would require DAO approval, ensuring alignment with community interests.

The proposal reflects broader trends in DeFi, where protocols are increasingly integrating lending mechanisms to optimize capital efficiency. By leveraging Llamalend's infrastructure, Curve aims to strengthen its position in the stablecoin ecosystem while diversifying revenue sources. The outcome of the vote will determine whether this model becomes a blueprint for future collaborations between lending platforms and stablecoin protocols.