MakerDAO looks to invest $500M into ‘minimal risk’ treasuries and bonds

Published at: June 29, 2022

MakerDAO is currently voting on a proposal aimed at helping it weather the bear market and utilize untapped reserves by investing 500 million Dai (DAI) stablecoins into a combination of United States treasuries and bonds.

Following a straw poll in a governance Signal Request, the decentralized autonomous organization (DAO) members now must decide whether the dormant DAI should go entirely into short-term treasuries or split 80% into treasuries and 20% into corporate bonds.

The Maker Governance votes to determine how to allocate 500 million DAI between different investment strategies.This allocation poll is a result of the passage of MIP65: Monetalis Clydesdale: Liquid Bond Strategy & Execution.A recap on how it would work. 1/ pic.twitter.com/SdF9QT2OM6

— Maker (@MakerDAO) June 27, 2022

MakerDAO is the governing body of the Maker protocol, which issues U.S. dollar-pegged DAI stablecoins in exchange for user deposits of Ether (ETH), Wrapped Bitcoin (wBTC) and nearly 30 other cryptocurrencies.

This proposal represents a major step for Maker DAO, as it signals its intent to extend beyond the crypto realm and earn yield from traditional “safe” financialinvestments with its flagship DAI.

One of the largest delegates in MakerDAO, Doo, voted for the 80/20 split allocation. He reasoned that the allocation would be beneficial for the protocol in the long term for several reasons including its new exposure to major traditional financial institutions and learning to manage finances in a bear market.

"As TradFi is seeing interest rate increase due to the FED," Doo told Cointelegraph on June 29, "Maker protocol working with TradFi to take advantage of the high interest would be able to strengthen its revenue model."

MakerDAO allows participants vote on proposals by staking their Maker (MKR). So far, the option to split the Dai between treasuries and bonds has 99.3% MKR token support, albeit from just 12 voters. Governance participation at Maker is currently at its lowest level in 2022, with 169,196 MKR tokens staked.

The poll ends on June 30 at 12:00 pm EST, leaving just a short amount of time for other voters to pick a side, abstain or reject the options.

Once an option is chosen, European wholesale lender Monetalis will provide MakerDAO access to the financial instruments it wants. Monetalis CEO Allan Pedersen issued the Signal Request in the forum with options that his firm could provide the DAO.

The firm has a goal of transitioning to low carbon resource efficiency, as per the UN’s definition.

The DAO’s decision to invest such a large amount of funds is based on recommendations by several members who believe that deploying the unused funds could help boost the protocol’s bottom line with minimal risk.

Related: Less than 1% of all holders have 90% of the voting power in DAOs: Report

Member of MakerDAO’s strategic finance core unit Sebastien Derivaux posited in a June 20 assessment of the allocation’s feasibility that although the amount in question seems relatively high, it should be a safe choice for the DAO:

“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.”

Derivaux suggested that the two options currently being voted on were the best of the five that were up for debate.

Despite the landmark move for Maker, MKR is down 1.6% over the past 24 hours and trading at $964.71, according to CoinGecko.

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