The community of Decentralized Autonomous Organization MakerDAO has voted and approved the creation of a $100 million “vault” in the DAI stablecoin for Huntingdon Valley Bank of America (HVB), an American bank founded in 1891. Now, the banking institution will be able to borrowing on DAI, after depositing loans (off-blockchain) on your balance sheet as collateral.
MakerDAO to lend $100 million to bank
Under the terms of the proposal, initially, the bank will be able to borrow up to US$100 million in DAI. But over the next 12 months, the bank’s lending cap could be raised to as much as $1 billion. Huntingdon Valley Bank will use the funds to support its lending operations. In the meantime, MakerDAO will be able to receive a yield of 3% per annum. The entity responsible for managing the bank’s loan assets on behalf of the DeFi protocol will be the Delaware-based MakerDAO Bank Participation Trust. Maker Improvement Proposal (MIP) #6 was approved by DAO members, with 87.24% of respondents voting “yes”.
Voting cycle has ended. 117,540 MKR voted YES (87.24% of all voting power used). MKR holders have approved the addition of HVBank, a 100 million DAI debt ceiling participation facility proposed by the Huntingdon Valley Bank, as a new collateral type in the Maker Protocol. pic.twitter.com/HWqisl9xfi
— Maker (@MakerDAO) July 7, 2022
“The voting cycle is over. 117,540 MKR voted YES (87.24% of all voting power used). MKR holders have approved the addition of HVBank, a 100 million DAI debt ceiling participation mechanism proposed by Huntingdon Valley Bank, as a new type of guarantee in the Maker Protocol.”
DAI reaches the traditional market
As Hugh Ragsdale, a spokesman for MakerDAO, highlighted, the partnership with the US-based bank will help connect DAI with traditional finance. Therefore, this will help to strengthen its use. “HVB’s proposal, Huntingdon Valley Bank, improves MakerDAO’s balance sheet and reputation. Financially, Maker offers a complete, diversified, wholesale solution for generating returns on real-world assets (not correlated with cryptocurrencies),” he said. As mentioned, the vast majority of DAO members supported the agreement. ACREinvest, one of those who voted to approve the proposal, commented that “innovation will open the floodgates for others to imagine what is possible outside of TradFi”. But not everyone was happy with the idea of a decentralized stablecoin working with traditional financial entities. Chris Blec, founder of DeFi Watch, for example, voted against the proposal. He expressed concern about the regulatory risks of this deal: “There is a risk that any of these third-party deals pose to MakerDAO in the context of today’s regulatory climate. What if a regulator forces this bank to freeze everything, cut ties with the DAO and keep all the money?” Blec told The Block. In the last year, MakerDAO has adopted a strategy of diversifying its treasury. Recently, MakerDAO approved a vote to invest $500 million in short-term US Treasuries and investment-grade corporate bonds. Read also: Former investment manager at Celsius sues company for fraud Read also: Bitcoin will recover in the 2nd half of 2022, says Bloomberg analyst