A PSM is a bank deposit owned by Maker. Currently, we have put all our liquidity at Circle.
Now if Circle is the Lehman from the next crisis, this is bad. This is why bank usually diversifies their counterparty exposure. So from a risk perspective, I think having many PSM is good.
It is also good from a business perspective as favoring competition between fiat-backed stablecoin can only help to stay relevant. And we should be unbiased. This is good for business development as well.
On-chain liquidity is not that important I would say as you can always mint as much as needed. PAX has low liquidity while BUSD is better but you can swap those at Paxos for no cost and in an instant. The backing is the same anyway.
In my view, the aim should be to decrease our liquidity reserves to ~10-20% and diversify the counterparty risk between at least 5 counterparties. i.e. a 2-4% exposure at most.
I would also favor more auditing. I would be fine with TUSD and USDT if we could have confidence in them. If we provide a 200M PSM to Paxos, I’m quite sure we could get more information.