MakerDAO Members Vote On $100M DAI Vault for Bank

Proposal Would Advance Push into Real World Assets

By: Samuel Haig Loading...

MakerDAO Members Vote On $100M DAI Vault for Bank

The MakerDAO community is voting on whether to provide a DAI vault to Huntingdon Valley Bank, a 151-year-old lender in Pennsylvania with $500M in assets.

A governance proposal for the vault went live on July 4 and will close on July 7. If passed, the vault will enable the bank to draw up to 100M DAI to support existing and new operations.

Real-World Assets

Just 15 voters have cast a verdict so far, with 78% of votes currently in favor of providing the vault to Huntingdon Valley Bank.

The proposal is the latest move in MakerDAO’s pivot to embrace real-world assets (RWAs), with the project seeking to diversify its exposure beyond overcollateralized loans taken out against digital assets.

The proposal comes one day after the Maker community voted to allocate 500M DAI across various RWA investment strategies, with voters backing an 80% allocation to U.S. Short Term Treasuries while 20% will be injected into Investment-Grade Corporate Bonds.

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The Defiant The Defiant

The vault was first proposed in March by RWA Company, a firm dedicated to assisting institutional borrowers access MakerDAO vaults that is headed by Gregory Di Prisco, the former head of business development at the now-defunct Maker Foundation.

The bank’s commercial lending division plans to leverage the vault for mortgage loans on commercial real estate investments, construction financing secured by real estate, collateralized debt, and credit provided to private equity funds and lender clients.

Bullish on Proposal

The vault is expected to garner a return of 3% for the MakerDAO Bank Participation Trust, a Delaware entity operated for the benefit of MakerDAO.

Commenters in MakerDAO’s governance forum appear bullish on the proposal.

Maker delegate, GovernanceHouse, said the move is a very important step for MakerDAO to take in connecting with the traditional financial system and utilizing DAI in undercollateralized lending.

Scaled to Other Institutions

“I like the approach to setting up one partnership that can be scaled to other institutions and standardize,” the delegate posted. “Rather than trying to come up with a ‘product’ that any financial institution can tap into… I am definitely super supportive of this initiative and I see big potential in doing this right.”

Flip Flop Flag Delegate LLC said the experience highlighted the “numerous iterations needed in order to make the onboarding of RWA off-chain collaterals… much easier.”

But the proposal appears to be receiving push-back on social media, with commenters expressing apprehension about the potential for a traditional financial institution to abuse a DAI vault.

WarezCapital asserted that Huntingdon Valley Bank won’t be transparent about how the DAI is deployed, tweeting “there is no chance the bank will disclose all the details.”

Worst Assets

Jccc_tweet said providing vaults to tradfi institutions will incentivize “any approved issuer to dump their worst assets which will inevitably lead to some default that the ecosystem will have to bear.”

Dodlnaut skeptically asked “why will a bank seek lending facilities fro Maker when it can get the same loans in tradfi?”