Circle has proposed an emergency overhaul of the interest rate parameters on Aave V3 Ethereum Core’s USDC pool, which has been pinned at 99.87% utilization for four days in the wake of the April 18 KelpDAO exploit.

In a governance post published Tuesday, Circle Chief Economist Gordon Liao argued Aave’s current interest rate mechanism is failing to clear the market. The pool holds $1.89 billion in supply against $1.89 billion in borrows, with less than $3 million in available liquidity. Borrow rates are flat at the post-kink ceiling of roughly 14%, and the pool has contracted about $60 million in the last 24 hours as repayments are matched dollar-for-dollar by queued withdrawals.

Liao’s proposal would raise the pool’s Slope 2 parameter for USDC deposits interest rate, from roughly 10% to 40% immediately, via a Risk Steward action. That would be followed by governance ratification of a 50% target within five to seven days.

Optimal utilization would fall from 92% to 87% on an interim basis and 85% on ratification. Under the target parameters, the maximum supply rate at 100% utilization would climb from roughly 12.6% to 48.2%.

Liao’s diagnosis is that current borrowers are using USDC borrowing as a queue-bypass mechanism to exit trapped positions and are insensitive to rates at current levels. The active lever, he argued, is supply attraction: yields in the 40–50% range should pull USDC from allocators within hours, restoring healthy utilization.

The proposal also recommends pausing Aave’s Slope 2 Risk Oracle for USDC, citing its documented underperformance during a February WETH spike and the April 6 offboarding of its maintainer, Chaos Labs.

Circle’s intervention is unusual: the stablecoin issuer is formally telling Aave that the market for its asset is broken.