Monetary Policy Overview

Monetary policy contracts determine the borrow interest rate for each crvUSD mint market. They are called by the Controller on every user interaction (rate_write) and can be queried for the current rate at any time (rate).

The current production monetary policy is the AggMonetaryPolicy (v4), deployed at 0x0749...251. It is used by all active crvUSD mint markets. The original AggMonetaryPolicy (0xc684...0a1) is only used by one deprecated market.

Rate Formula

Both versions share the same core formula:

$r = rate0 \cdot e^{\text{power}} \quad \text{where} \quad \text{power} = \frac{1 - price\_crvusd}{\sigma} - \frac{DebtFraction}{TargetFraction}$

The v4 contract uses an EMA of the debt ratio instead of the raw value and adjusts rates per-market based on debt ceiling utilization. See the AggMonetaryPolicy (v4) page for full details.

Intuition Behind Sigma

While sigma is often described as a "sensitivity parameter," it has a concrete financial interpretation. Consider the price deviation component of the formula in isolation (ignoring the debt ratio term):

$r \approx rate0 \cdot e^{d/\sigma}$

where $d = 1 - price\_crvusd$ is the depeg. This exponential can be approximated as:

$e^{d/\sigma} \approx \left(\frac{1}{1 - d}\right)^{1/\sigma}$

When this rate is applied over a period of length $T = \sigma$, the total interest cost equals the depeg itself. In other words, sigma represents the time period over which a borrower effectively pays for the current depeg through elevated interest rates.

This gives a practical decision rule: if a borrower expects crvUSD to remain depegged and can borrow elsewhere at rate0, they should compare their expected loan duration to sigma. If they plan to borrow for longer than sigma, it may be cheaper to close the loan now and reborrow elsewhere. If shorter, sitting through the elevated rate could be acceptable.

A smaller sigma means the rate spikes more sharply during a depeg (borrowers pay for it quickly), while a larger sigma spreads the cost over a longer period with a gentler rate increase.

Market → Monetary Policy Mapping

The table below is fetched live from on-chain data. Each Controller's monetary_policy() is queried to show which policy version is currently active for each market.

Loading market data...