Summary:
- MakerDAO will tap digital bank Sygnum for its diversification effort.
- This comes after the community voted to deploy excess funds and non-yield-bearing assets from Maker’s treasury into external investment vehicles.
- Majority of the Maker community opted for a $500 million allocation with an 80-20 split between U.S. short-term Treasury bonds and investment-grade (IG) corporate bonds.
- Sygnum will collaborate with BlackRock Switzerland to facilitate phase 1 of the billion-dollar investment.
MakerDAO, the decentralized community governing DAI stablecoin issuer Maker, voted to leverage crypto-native bank Sygnum as a lead partner for the protocol’s massive $500 million treasury diversification strategy.
The latest Executive Vote supported by MKR holders and Delegates enacted the first 1-million-DAI pilot transfer to deploy PSM’s USDC on liquid bonds.
🗳 https://t.co/TMNDkvVqHB
This transaction is executed via the newly created real-world asset Maker Vault called RWA007-A.
Maker is an OG protocol in the decentralized finance (DeFi) ecosystem and a leading lending platform. The lender powers the DAI stablecoin and boasts over $7 billion in total value locked, per data from DefiLama.
In June, the decentralized autonomous organization (DAO) responsible for governing Maker put up an allocation proposal for a vote. The idea was to deploy $500 million in excess cash from the treasury’s vault, into U.S. short-term treasuries and corporate bonds.
Data from the poll showed that the community favored an 80-20 split of the funds between Treasury and Corporate bonds. The proposal was aimed at diversifying Maker’s balance sheet and tapping the extra cash to generate profit or yield.
Notably, Maker’s Treasury holds considerable amounts of non-yield-bearing assets like Circle USD Coin (USDC).
• 80% in US Short-Term Treasuries (40% 0-1y US Treasury ishares ETF & 60% 1-3y US Treasury ishares ETF from BlackRock).
• 20% in IG Corporate Bond (split of US Treasury Index and Active global mandate for 0-5y investment grade corporate bonds from Baillie Gifford).
Indeed, the DAO chose to tap Sygnum services due to its “two-way crypto-traditional finance bridge and regulated banking experience”.
MakerDAO Europe Growth Lead Rajiv Sainani, said that the diversification effort required “a counterparty with a banking license who could acquire the ETFs and also provide institutional-grade custody” for cryptocurrencies and traditional financial assets like bonds.
Sygnum’s Chief Clients Officer Martin Burgherr opined that the decision to choose Sygnum further strengthens the synergy between TradFi and DeFi investments.
Maker’s vote confirmed Sygnum as a “crypto-native” bank, working hand-in-glove with the DeFi community. It is proof that traditional-crypto finance industry investments can flow both ways, and that the future has heritage, especially when shaping next-generation finance.
For phase one of the strategic investment, Sygnum will work with BlackRock Switzerland to deploy $250 million in investment, per Thursday’s announcement.
MakerDAO Bolsters DAI After UST Debacle
While the DAI stablecoin is an algorithmic stablecoin pegged 1:1 to the U.S. dollar, the token is also overcollateralized due to its Ether (ETH) backing as well. MakerDAO’s investment strategy could serve as a vehicle to solidify the protocol’s balance sheet, and in turn, bolster faith that algorithmic stablecoins can function as promised.
Such an effort is arguably crucial in the wake of Terra’s cratering. The incident which saw TerraUSD (UST) fall to pennies obliterated north of $40 billion from investors. Indeed, the crypto industry faced ripple effects from the crash and regulators have used UST’s failure as a lightning rod for tighter stablecoin regulatory policies.
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