Gauntlet has proposed reducing the liquidation collateral factor for rsETH on Compound's Ethereum WETH Comet from 93% to 88% and raising the liquidation penalty from 4% to 6%, completing the isolation of rsETH following the April 2026 Kelp bridge exploit. The borrow collateral factor was already set to 0%, blocking new borrowing. Gauntlet cites rsETH's minimal DEX liquidity as the primary systemic risk driver making orderly liquidation uncertain.
For Armada's crypto repo desk, this governance action establishes a clear DeFi-native precedent: a bridge exploit history combined with thin on-chain liquidity is sufficient grounds for a major protocol to isolate a collateral asset entirely. Armada should apply equivalent criteria when evaluating any bridged liquid staking token as potential repo collateral, using Gauntlet's liquidity depth and exploit-history screens as a minimum diligence standard before accepting such assets against cash or Treasury lending.