Key points to remember
- The MakerDAO community has adopted a proposal to integrate a US bank into its collateral system.
- The Huntingdon Valley Bank has a debt limit of $100 million. He can borrow the amount in DAI by depositing collateral in an off-chain account.
- Five more real-world assets have been added to MakerDAO, with more suggestions being discussed in the governance council. The protocol recently voted to allocate $500 million in DAI in bonds.
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MakerDAO will now be able to lend up to $100 million worth of DAI to Huntingdon Valley Bank when it deposits collateral in an off-chain account. This is the first time that a US bank has connected to the DeFi ecosystem.
Integrating TradFi into DeFi
MakerDAO is taking steps to conquer the world of traditional finance.
The DAO of the main DeFi protocol passed a vote today to add Huntingdon Valley Bank to its Real-World Asset Maker Vaults, meaning MakerDAO will be able to lend up to $100 million in DAI to the Pennsylvania-based bank each time it posts collateral on a specific off-chain account. A majority of 87.27% 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 that users can deposit mostly comes in the form of major digital currencies such as Bitcoin and Ethereum. The accepted proposal brings a regulated US bank in the DeFi ecosystem for the first time.
Other real-world assets have already been added to MakerDAO’s vaults with various debt caps. The protocol can lend up to $18 million in DAI for nominal real estate posted as collateral, $14 million to commercial real estate developers, $5 million to acquire U.S. revenue-based financing assets, nearly $2 million for token freight bills and $1.8 million short term. Commercial debt. In total, with the new proposal now passed, MakerDAO can lend $141 million in DAI for secured real-world assets.
The integration of Huntingdon Valley Bank will be the Protocol’s largest to date. The DAO is also exploring the possibility of letting the French multinational investment bank Societe Generale borrow $30 million from DAI. Moreover, it provides invest $500 million in DAI in US Treasuries and corporate bonds.
While the MakerDAO algorithm automatically liquidates users if their collateral falls below a certain threshold, the Huntingdon Valley Bank Vault cannot be terminated by a governance vote as its assets are collateralized off-chain rather than on Ethereum.
The increasing complexity of MakerDAO’s warranty system recently prompted a hotly contested proposal for the DAO to appoint an advisory committee that could advise MKR holders on future proposals. The idea was rejected on June 27, with 60.17% of the votes against the proposal and only 38.28% for.
Disclosure: At the time of writing this article, the author of this article owned ETH and several other cryptocurrencies.