The Defiant

MakerDAO To Shutter SocGen’s $30M Credit Line

Collateralized Lending Protocol Reverses Course On Real-World Assets

By: Samuel Haig Loading...

MakerDAO To Shutter SocGen’s $30M Credit Line

MakerDAO, the second-largest DeFi lending protocol, plans to shut down the credit vault launched for a subsidiary of Societe Generale, France’s third-largest bank, after the firm paid down its debts last month.

The governance proposal is one of several that Maker’s community began voting on yesterday. If passed, Maker will reduce the debt ceiling for SG-Forge’s vault to 0 DAI, meaning the firm cannot take out new loans using the protocol.

Last month, an SG-Forge representative posted on Maker’s forum that SG-Forge had repaid its debt.

“The overall transaction was a success,“ the representative said. “It has demonstrated that on-chain refinancing markets could be opened to real money asset owners, in full compliance with banking standards, with potentially significant improvements in financial terms, operational efficiency, settlement, and counterparty risks.”

The news comes as MakerDAO actively seeks to limit its exposure to real-world assets (RWAs) in line with its controversial “ Endgame” roadmap.

Real World Assets

MakerDAO’s Real World Finance Core Unit worked with SG-Forge on pitching a 30M DAI credit line for SG-Forge to the Maker community in June 2022.

The vault was launched in August, with SG-Forge providing a 40M Euro bond in the form of OFH tokens — tokenized securities backed by AAA-rated home loans. The move came as Maker was seeking to expand its revenue streams derived from real-world assets.

In July 2022, the Maker community voted to invest 400M DAI in short-term U.S. treasuries and 100M DAI in corporate bonds. The following month, Maker opened a 100M DAI credit line to Huntingdon Valley Bank, a 151-year-old traditional bank.

SG-Forge didn’t access the credit line until January of this year, when it withdrew $7M in DAI from MakerDAO.

Successful Transaction

SG-Forge acknowledged that the utility of its OFH security token was hindered by illiquidity. In the event of a liquidation, the firm would have needed to execute actions manually to meet the margin calls.

“We will continue working on expanding Security Tokens refinancing by scaling such DeFi solutions,” the representative said. SG-Forge added that it will closely monitor MakerDAO’s endgame roadmap to evaluate future business development opportunities moving forward.

Changes at Maker

Other live proposals include measures to reduce the debt ceilings for Maker’s YFI, LINK, and MATIC vaults to 0 DAI, and significantly increase the fees for its WBTC and GNO vaults to 4.9%.

If passed, Coinbase Custody would also be onboarded to the Maker protocol. Coinbase Custody will access a vault with a debt ceiling of 500M DAI, while MakerDAO will receive a 2.6% return on its USDC holdings over 364 days, per a proposed legal agreement between the two entities.

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