The world’s largest decentralized finance lending protocol, MakerDAO, wants to invest $500 million in short-term US treasury bonds and investment-grade corporate bonds. This was approved by MakerDAO members in a community-wide, months-long vote.
$400 million worth of asset reserves will go towards US treasury bonds and $100 million in corporate bonds. MakerDAO has already completed a pilot transaction of $1 million. The rest will follow soon. Nadia Alvarez, MakerDAO Growth head, said the 80-20 split between treasuries and bonds remained the favored approach during the voting process. This shows the opportunity associated with the move.
Monetalis, DeFi asset advisor, will supervise the conversion of $500 million worth of MakerDAO’s native stablecoin DAI into US dollars. Sygnum, a digital asset bank, will convert half the funds and Baillie Gifford will see the other half. The funds will be used to buy US treasuries and corporate bonds. This investment can be seen as an effort to diversify the billions of dollars worth of funds currently collateralizing DAI. It should be noted that the majority of Maker’s $9 billion DAI collateral pool is in USDC – a stablecoin that offers zero return on investment. The generation of yield will enhance the protocol’s capabilities and the ability to secure capital investment.
Rune Christensen, MakerDAO’s founder, proposed divesting DAI from USDC in August because of concerns surrounding USDC’s creator Circle. When the US Treasury Department sanctioned a list of wallet addresses associated with the banned Ethereum coin mixing tool Tornado Cash, Circle chose to voluntarily freeze the USDC. Christensen highlighted this move as concerning of Circle’s centralization and willingness to assist government censorship.