Thursday, December 8, 2022

MakerDAO Invests $500M in U.S Treasuries And Corporate Bonds

The governance community of MakerDAO has allotted $500 million to be invested in U.S Treasuries and corporate bonds. MakerDAO is the decentralized autonomous organization (DAO) behind the stablecoin DAI. Precisely, the investment will be made from the overcollateralized DAI stablecoin.

A large percentage of the MakerDAO fund, up to 80% would be allocated to U.S short-term Treasuries.  Accordingly, the remaining 20% will be left to investment-grade corporate bonds. 

The vote on whether to make this $500 million investment was proposed in June and has since been ongoing. Community participants were made to vote by staking their Maker token (MKR). MakerDAO was looking at making yields from the investment and was also seeking a means to weather the bearish market. 

Sebastien Derivaux, a member of MakerDAO’s strategic finance core unit regarded the investment as a safe choice. “An investment of 500M DAI in this context, that is expected to remain liquid and low volatility, is therefore not a significant risk for the DAI peg nor the solvency of MakerDAO,” he said.

MakerDAO Community Votes For Split Allocation

Part of the argument then had been to determine how the fund should be split. The considerations were if the entire fund should go into the U.S treasuries or be split 80/20.

One of MakerDAO’s largest delegates identified as Doo voted in favor of the 80/20 allocation. In his opinion, the 80/20 split allocation will be beneficial for the protocol in the long run. Doo explained that it would grant new exposure to major traditional financial institutions. Also, it will provide more insights into how to manage finances in harsh market conditions.

“As TradFi is seeing interest rate increase due to the FED. Maker protocol working with TradFi to take advantage of the high interest would be able to strengthen its revenue model,” Doo stated.

Altogether, the vote for an 80/20 split allocation received more than 99.3% MKR token support. 

Now that it has finally been decided, Decentralized Finance (DeFI) asset adviser Monetalis will provide the financial instruments which MakerDAO will need at this time. Meanwhile, digital asset bank Sygnum announced that it is the lead partner.

 

Victoria Nye
A Blockchain columnist who is enthusiastic about developing a network interface between the real world and the cryptosphere.

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