Terra Classic Proposal #12226 Seeks to Move $62,000 USDC Liquidity to Injective Before CCTP v1 Shutdown
A new Terra Classic governance proposal is seeking to move approximately 1.23 billion LUNC and $62,193 in community owned USDC liquidity from Noble issued USDC to Injective issued USDC, as the planned shutdown of Circle’s CCTP v1 approaches.
Proposal #12226, titled “Reroute LUNC/USDC Position To Injective USDC,” is currently in the voting period. The proposal focuses on protecting liquidity deployed under the framework of Proposal 12171. The community liquidity is currently distributed across three LUNC/USDC pools on Terra Classic.
The proposed migration would move the USDC exposure away from Noble and into Injective issued USDC, while keeping the community’s LUNC liquidity within the Terra Classic ecosystem.
Why the USDC Liquidity Needs to Move
The main reason behind the proposal is the planned retirement of Circle’s CCTP v1.
The USDC held by the Terra Classic community was originally issued through Noble, which previously served as a native Cosmos issuance route for Circle’s USDC.
According to the proposal, Noble operates with CCTP v1 and does not have a planned upgrade to CCTP v2. Circle’s CCTP v1 timeline calls for capacity reductions beginning on October 31, followed by a full pause of the v1 contracts on December 1, 2026.
This creates a potential problem for USDC held on Terra Classic.
Today, the liquidity can ultimately be connected back to Circle’s USDC through a route involving Terra Classic, Noble, CCTP and Ethereum. If CCTP v1 is paused without a replacement route for Noble, the proposal argues that the community’s Noble issued USDC could lose its existing redemption path.
The proposed solution is therefore to migrate the liquidity before the CCTP v1 capacity begins to decline.
Terra Classic Holds More Than 1.23 Billion LUNC in These Pools
The proposal states that the community owned liquidity is distributed across three Terra Classic decentralized exchanges.
The positions were verified on September 5, 2026:
| DEX | LUNC | USDC |
|---|---|---|
| TerraSwap | 417,875,015 | 21,169.12 |
| Terraport | 411,812,561 | 20,577.14 |
| Garuda DeFi | 404,251,874 | 20,519.11 |
| Total | 1,233,939,450 | 62,265.37 |
After accounting for liquidity that is not owned by the community, the proposal puts the community’s position at approximately 1,232,496,754 LUNC and 62,193.25 USDC.
The proposal is specifically designed to migrate this community owned position rather than remove the liquidity from Terra Classic.
How the Proposed Migration Would Work
The migration is planned in several stages to reduce operational and liquidity risks.
Phase 0: Establish and Test the Route
The first step is to establish a new IBC client, connection and transfer channel between Terra Classic and Injective.
The route would be relayed by LuncGoblins / Fragwuerdig.
Before any major migration begins, the proposal calls for a small test transaction to travel through the complete route using real value.
The signers would also rehearse the process before the main migration starts.
This test is intended to confirm that the complete route works before larger amounts are moved.
Phase 1: Migrate the Liquidity in Tranches
Rather than moving all three liquidity positions at once, the proposal recommends migrating them in stages.
Under the preferred approach, each pool would be divided into two 50 percent migrations.
The first pass would move 50 percent of the positions from:
TerraSwap → Terraport → Garuda DeFi
The second pass would repeat the same sequence with the remaining 50 percent.
This approach would allow each pool to retain approximately half of its community liquidity during the migration.
The proposal also allows the migration to be completed in three larger tranches if signature collection takes longer than expected.
The Proposed USDC Route
Each migration tranche would follow the same general path.
1. Terra Classic
The community liquidity position would be withdrawn and the released USDC would be transferred through IBC.
2. Ethereum
The USDC would be minted through the existing route and then burned toward Injective using Circle’s CCTP v2.
3. Injective
USDC would be minted on Injective and then transferred back to Terra Classic through the newly established IBC channel.
4. Terra Classic
The returned USDC would first be deposited into the multisignature wallet used for the Proposal 12171 framework.
The signers would then deploy new LUNC/USDC liquidity positions using the Injective issued USDC.
Because the new USDC is a different denomination, the proposal says the three decentralized exchanges will need to create new liquidity pairs.
The existing pools would remain in place but would no longer contain the community owned liquidity.
Why the Migration Is Time Sensitive
The proposal sets several internal milestones ahead of the CCTP v1 shutdown.
| Timeline | Planned Action |
|---|---|
| Early September | Establish Injective client, connection and channel |
| Mid September | Complete end to end test transaction |
| Late September | Complete first migration pass |
| Mid October | Complete second migration pass |
| October 31 | CCTP v1 capacity begins declining |
| December 1 | CCTP v1 contracts paused |
The proposal notes that the migration could finish earlier depending on how quickly the multisignature signers complete each required transaction.
Migration Costs
The proposal estimates that withdrawing the liquidity would trigger Terra Classic’s current 1.5 percent on chain tax on the LUNC portion.
Based on the community’s LUNC position, the estimated tax is approximately $933.
Providing liquidity again does not trigger the same tax, meaning the proposal expects the tax to be paid once rather than twice.
The proposal estimates that the overall position would return approximately 0.75 percent smaller, with most of the reduction coming from the LUNC tax.
The cross chain routing costs are expected to be relatively small compared with the size of the liquidity position. The proposal estimates approximately $0.09 per routed tranche, plus Ethereum gas costs associated with the CCTP route.
No additional community funding is requested for the migration.
Key Risks
IBC Channel Delays
The new Injective channel must be established and tested before the migration begins. If this cannot be completed in time, the migration could be delayed.
Relayer Availability
IBC packets require relaying. If the relayer becomes unavailable during the migration, transactions could remain pending until the relayer resumes or another operator takes over.
Migration Interruption
If the process fails during the cross chain route, the proposal states that the funds would remain on Ethereum or Injective as native USDC rather than being permanently lost. However, accessing and returning the funds could take additional time.
Transit Security
The proposal acknowledges the risk associated with moving assets through individual transaction steps. It seeks to reduce this risk through limited tranche sizes, fixed destination addresses, destination restrictions and public transaction reporting.
LUNC Price Movement
The LUNC released from each liquidity pool would be held by the multisignature wallet while the migration is completed.
Because the migration is performed in smaller tranches, the proposal aims to reduce the amount of LUNC exposed to price movement at any one time.
Possible Noble Alternative
Circle has indicated that it is working with Noble and Cosmos ecosystem participants on an interim routing solution. However, the proposal argues that there is currently no deployed replacement that can be relied upon before the CCTP v1 deadlines.
The proposal therefore favors moving the community liquidity to Injective rather than waiting for an alternative solution that has not yet been implemented.
Other Noble USDC Holders Face the Same Deadline
The proposal also highlights a separate group of Terra Classic users holding Noble issued USDC outside the community liquidity pools.
It estimates that approximately 54,781 USDC remains on Terra Classic in ordinary wallets and contracts.
These holdings are separate from the community owned liquidity covered by Proposal #12226.
The proposal warns that holders of Noble issued USDC should consider their own options before the December 1 CCTP v1 shutdown rather than assuming that the community migration will cover their assets.
What Happens Next?
The immediate step is the governance vote on Proposal #12226.
If approved, the signers would proceed with establishing and testing the Injective route before beginning the liquidity migration.
The proposal does not seek to remove the community’s LUNC/USDC liquidity from Terra Classic. Instead, it aims to replace the current Noble issued USDC with Injective issued USDC while redeploying the liquidity across the same three decentralized exchanges.
The key deadline is December 1, 2026, when CCTP v1 is scheduled to be paused. The proposal therefore gives the Terra Classic community a limited window to complete the migration before the existing Noble USDC redemption route becomes unavailable.
As of September 14, Proposal #12226 remains in the voting period, with voting scheduled to close on September 19.
For Terra Classic, the decision is ultimately about whether to proactively move community owned USDC liquidity to a newer issuance route or continue relying on the existing Noble based infrastructure ahead of the CCTP v1 shutdown.
