MakerDAO, the “longest-standing” DeFi lending protocol and creator of DAI, the “original,” decentralized stablecoin, announced “the strategic investment of $500M USD (converted from $500M DAI) into a combination of US Short Treasuries and Investment Grade Corporate Bonds.”
The move, which will be initiated by DeFi asset advisor Monetalis, aims “to diversify MakerDAO’s balance sheet into scalable legacy finance investments, limiting exposure to any one asset and expanding revenue streams.” Furthermore, the allocation of DAI will “promote the usability of digital assets in the traditional space, extending DAI’s influence beyond the confines of crypto.”
The proposal was “presented to the MakerDAO community on the MakerDAO forum.”
The community voted “to create an 80% composition of US Short-Term Treasuries and allocate the remaining 20% to IG Corporate Bonds.” The vote was originally “posted to the community forum in late June, granting a 3-month window during which MakerDAO community members could decide upon the optimal approach to ensure investment longevity.”
An initial deployment of a $1 million pilot transaction “has now been completed and approved through an executive vote by MKR holders, with the full investment to follow.”
Nadia Alvarez, Head of MakerGrowth, commented:
“The 80-20 split between treasuries and bonds remained the favored approach during the voting process. This showcases the opportunity associated with the move, and seeing such adamant support from the community is very exciting. Monetalis developed and implemented an innovative holding structure for the chosen assets that ensures only the Maker Community can control the funds via its decentralized voting system, retaining the sole ability to liquidate the investment through an executive vote. This provides a practical safety net for the deal, and furthermore, demonstrates the steps that can be taken to bridge the traditional and decentralized worlds of finance effectively.”
The motivation behind this strategic investment “surrounds MakerDAO’s USDC holdings, which prior to the allocation of treasuries and bonds, did not generate any yield for the protocol.”
The generation of yield on MakerDAO’s asset reserves “allows for the enhancement of the protocol’s capabilities and the ability to secure capital investment.” By partnering with Monetails’ professional bond managers and starting a diversification strategy, MakerDAO initiates “the transformation of the protocols USDC reserves into workable, yield-creating, real-world assets.”
Allan Pedersen, CEO of Monetails, commented:
“Providing exposure to bonds for MakerDAO represents a significant leap forward in the combination of real-world finance and decentralized monetary solutions. We expect to see this integration between TradFi and DeFi only accelerate and increasingly focus on financing the world’s move to Net-Zero. While the worlds of finance are often seen as being at odds, we believe the global problem of combating climate change will be the impetus that finally brings DeFi and TradFi productively together. As evidenced with this deal, we are confident MakerDAO will be one of the avant-gardes of this move.”