- The MakerDAO community has passed a proposal to integrate a U.S. bank into its collateral system.
- The Huntingdon Valley Bank has a debt ceiling of $100 million. It will be able to borrow the sum in DAI by depositing collateral into an off-chain account.
- Five other real-world assets have been integrated to MakerDAO, with more suggestions in discussion on the governance board. The protocol recently voted to allocate $500 million in DAI into bonds.
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MakerDAO will now be able to loan up to $100 million worth of DAI to Huntingdon Valley Bank when it posts collateral to an off-chain account. It’s the first time a U.S. bank has connected to the DeFi ecosystem.
Integrating TradFi into DeFi
MakerDAO is taking steps to take over the traditional finance world.
The leading DeFi protocol’s DAO passed a vote today to add the Huntingdon Valley Bank to its Real-World Asset Maker Vaults, meaning that MakerDAO will be able to lend up to $100 million in DAI to the Pennsylvania-based bank whenever it deposits collateral into a specific off-chain account. An 87.27% majority voted in favor of the proposal.
MakerDAO is an Ethereum-based DeFi protocol that allows users to mint the DAI stablecoin when they deposit collateral. To date, the collateral users can deposit has mostly come in the form of major digital currencies like Bitcoin and Ethereum. The accepted proposal brings a regulated U.S. bank into the DeFi ecosystem for the first time.
Other real-world assets have already been added to MakerDAO’s vaults with various debt ceilings. The protocol can loan up to $18 million in DAI for tokenized real estate posted as collateral, $14 million to commercial real estate developers, $5 million to acquire U.S. Revenue Based Financing assets, almost $2 million to tokenized freight invoices, and $1.8 million to Short Term Trade Receivables. In total, with the new proposal now passed, MakerDAO can loan $141 million in DAI for collateralized real-world assets.
The Huntingdon Valley Bank integration will be the protocol’s largest to date. The DAO is also looking into potentially letting the French multinational investment bank Société Générale borrow $30 million in DAI. Additionally, it plans to invest $500 million in DAI in U.S. Treasury bills and corporate bonds.
While the MakerDAO algorithm liquidates users automatically if their collateral falls under a certain threshold, the Huntingdon Valley Bank Vault can only be terminated through a governance vote as its assets are collateralized off-chain rather than on Ethereum.
The increasing complexity of MakerDAO’s collateral system recently prompted a hotly contested proposal for the DAO to appoint an advisory committee that could advise MKR holders on future proposals. The notion was rejected on Jun. 27, with 60.17% of votes going against the proposal and only 38.28% voting in favor.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.