The vault collateral ceiling for USDT has been reached and there is more demand for using USDT as collateral. To allow further increasing the bridge capacity prior and post launch of the DeFi hub, it is suggested to raise the ceiling to 2,000,000 USDT. That would allow for a maximum of of ~$1,300,000 of additional mint capacity of iBTC (assuming the current ‘safe mint threshold’ of 155% for USDT).
USDT has proven to be a very resilient collateral asset and has so far consistently remained its USD peg over the last year with no deviation greater than 1% and only one deviation of more than 0.5%. Furthermore, the ceiling of USDT as vault collateral does not depend on it’s liquidity as it can be assumed that liquidators, who may want to avoid any price risk/exposure, will lock in their profit in a stable coin, so that no trading is required. Apart from that, USDT maintains deep liquidity against BTC and other assets on centralized exchanges as well es decentralized exchanges on the Polkadot ecosystem. As outlined in the discussion post https://interlay.subsquare.io/post/19 it is planned to create a large USDT/iBTC pool on Interlays DeFi hub to facilitate efficient trading at scale.