The BabelFish governance multisig signers enabled the new emergency deposit pause feature (BIP-0004) that was already implemented as part of the most recent round of security updates made to the BabelFish smart contracts. This feature was supposed to be enabled after the BIP-0004 vote passes. The initial address given deposit pause capabilities is the BabelFish governance multisig address.
Reason standing behind this decision is that BabelFish multisig signers feel responsible for properly managing the stablecoin pools and potential risks, even before the appropriate tools would get approved by the BabelFish Community.
Under normal circumstances, the decision to pause deposits for any reason would be put to a vote by the BabelFish Bitocracy. However the BabelFish staking contract is currently paused for maintenance, and while technically a vote could be held, it wouldn’t be fair to announce and hold a vote while FISH holders are unable to adjust their stake. For example, if a FISH holder strongly supports or opposes the proposal being voted on, they currently cannot increase their stake or extend their staking duration to increase their voting power in time to more strongly influence the vote.
In this particular case the deposit pause feature has been used to temporarily pause RDOC deposits, but withdrawing RDOC is still possible. RDOC has not been paused because of a vulnerability or anything that fundamentally threatens the value of RDOC. It is instead a precautionary measure as a matter of risk management. Currently, RDOC makes up approximately 15% of BabelFish deposits, and this number has been quickly rising over the past few months. However there are very few venues available for RDOC liquidity, increasing the risk that BabelFish ends up holding a disproportionately large amount of illiquid RDOC and very few more liquid stablecoins such as BUSD, DAI, USDC, or USDT.
Once the staking contract is unpaused, the proposals to both enable the deposit pause feature and activate the pause for RDOC specifically will be put to a proper Bitocracy vote, which will confirm or cancel the decision made by the BabelFish multisig signers.
We anticipate that in the medium-term this kind of problem will be able to be addressed using the incentive algorithm rather than needing to pause deposits to manage this kind of risk. The incentive algorithm is currently under development and will be proposed for activation once development, review, and testing is complete. Stay tuned for more details about this!
If anyone has questions or feedback about this decision or how it was made, we welcome discussion on this thread in the BabelFish community forum.