Aave DAO has approved a proposal to eliminate USDS and DAI as eligible collateral by setting their loan-to-value (LTV) ratio to 0% across all Aave V3 instances. Additionally, the risk reserve ratio will be increased to 25%. The decision follows concerns over USDS's declining profitability and its issuance model's asymmetric risks. MakerDAO founder Rune has commented on the decision, suggesting that USDS may regain collateral eligibility in the future as its transparency and scalability improve.