- The Sky protocol voted to slash its daily buyback programme by 87%, from $300,000 to $37,600.
- Founder Rune Christensen cited geopolitical risk from the war in Iran as a primary reason for the capital preservation move.
- Critics argue the reduction was long overdue as the stablecoin’s backstop capital failed to grow alongside its supply.
- The move aims to replenish the protocol’s surplus buffer, which ratings agency S&P Global cited as a material weakness.
- Since February 2025, the buyback programme has cost Sky $116.6 million in USDS tokens.
The digital cooperative governing the major DeFi protocol Sky took decisive action on Thursday, voting to dramatically reduce its token buyback programme. This move aims to bolster the reserves backing its stablecoins, USDS and DAI, amid heightened global uncertainty.
The vote cut daily buybacks from $300,000 to just $37,600, an 87% reduction that will last three months. Sky founder Rune Christensen suggested the precaution is necessary due to the war in Iran, warning of a potential massive oil shock. Consequently, the protocol stated the change would improve capital efficiency and support the ecosystem’s long-term strength.
However, critics contend the action was overdue. This is because the supply of USDS has surged over 22% in the past month to about $7.9 billion, according to DefiLlama data. Meanwhile, the aggregate backstop capital meant to stabilize the coins has remained flat at around $50 million.
The program had used daily revenue to purchase and distribute SKY tokens, incentivizing governance participation. S&P Global previously gave Sky a B- rating, partly due to this limited surplus buffer, which it called a material weakness in an assessment. The agency noted the protocol’s weak earnings capacity.
Proponents believe pausing buybacks will help replenish this crucial buffer. Christensen also wrote that Sky has other mechanisms to ensure stability, such as issuing new tokens. Following the news, the SKY token increased about 5% over the past week.
✅ Follow BITNEWSBOT on Telegram, Facebook, LinkedIn, X.com, and Google News for instant updates.
