I do not think this proposal would achieve the goal of 1:1 peg.
The reason why there lacks liquidity is because the peg does not work well. The reason why the peg does not work well is because there are imbalanced demands from two sides of the market. Right now, there is not much incentive to hold BitCNY or BitUSD. Sometime in the future, there might be too much incentive to hold BTAs, if much forced coverage occurs, which makes the interest of holding BTAs high enough. That is to say, the demands from two sides of the market will fluctuate, and we need a self-adjustable tool to compensate the demand difference. There will be ALWAYS uneven demands from the two sides.
Under this proposal, even if the collateral multiple is raised, as a BTSX bull, I personally do not have the incentive to hold BitUSD/BitCNY and be a market maker. I don't care as much for the collateral as for how much interest I would receive for holding BTAs. Take BitCNY for example, why would I want to hold BitCNY while I can earn higher interest holding real CNY outside?
What is our goal? 1:1 peg for BTAs, right? Only when this occurs, will there be exchange agents that honors 1:1 exchange. Then merchants are willing to take BitUSD/BitCNY as payment, because they know they can exchange for real USD/CNY anytime.
Market makers want to earn the spread. This is their only goal. Simple as that. In a one-sided market, no one dares to be the market makers, because they would end up holding most of the BitUSD/BitCNY while no one else wants to hold. Higher/adjustable collateral would not solve the problem of one-sided market.
Open to discussion, and ready to be persuaded.