MakerDAO Eyes More US Treasury and Bond Investments

The proposed strategy could see the DAO investing up to $750 million at an annualized yield of about 4.5% after custody and expected trading cost

article-image

Artwork by Axel Rangel, modified by Blockworks

share

Decentralized protocol MakerDAO is looking to increase its investments in US Treasury and bonds to $1.25 billion in a proposal by community member and CEO of Monetalis, Allan Pedersen. 

In an earlier Maker Improvement Proposal (MIP), the community governance of MakerDAO voted in favor of deploying an estimated $500 million in short-term US treasury bond exchange-traded funds (ETFs), making headlines at the time.

This latest proposal will increase the debt ceiling of the US treasury bonds by $750 million to take advantage of the current yield environment and increase revenue on Maker’s existing assets. 

“After review of various highly liquid money market options, we found that the simple solution of laddering US Treasuries over a 6-month period with bi-weekly maturities presents a strong, flexible and effective solution for Maker,” Pedersen wrote.

Some advantages Pedersen noted included lower trading and custody costs, increased tax efficiency and a flexible strategy.

The strategy is believed to deliver an annualized yield of approximately 4.5% after custody and expected trading cost, Pederson wrote.

That should provide an additional $33.75M in additional revenue for the Maker treasury, according to David Rodriguez of Blockworks Research.

“The fact that we request this allocation immediately is purely because Monetalis is ready to deliver this strategy and believe it is to Maker’s benefit to take immediate advantage of the current yield environment as much as it can,” Pederson said. 

If the proposal is approved, Monetails will not be the asset manager or investment advisor. Rather, the proposed asset strategy will be implemented by Sygnum Bank.

As a next step, the debt ceiling increase must move to a governance poll ahead of a one week vote, a Maker spokesperson told Blockworks.

Assuming it passes, “Core Units will start working on the required implementation and, once the work is done, a further Executive Vote would deploy the required changes to the Maker Protocol,” the spokesperson said.

Maker governance recently rejected a proposal from Cogent Bank, an FDIC regulated Florida commercial bank which proposed to add $100M of loans to MakerDAO’s existing RWA Master Participation Trust, on the same terms as Maker previously approved for Huntingdon Valley Bank in July 2022.

Rodriguez viewed the rejection as a sign that the DAO is trying to avoid becoming overextended as it works through a plan to onboard assets — often called “real-world assets” (RWAs).

“MakerDAO is already familiar with the Sygnum Bank and the players in the Monetalis Clydesdale RWA arrangement, and [the new proposal is] just increasing the debt ceiling of a live vault,” Rodriguez said.

By contrast, Cogent Bank would have required the creation of a new RWA vault, and required more attention.

“The endgame [plan] is looking to scale RWAs (and eventually identify a cap), but it looks like right now the priority is endgame and not expanding RWAs, as discussions around endgame are occurring.”

Macauley Peterson contributed reporting.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

The Fidelity Ethereum Fund, like other proposed ETH ETFs, seeks to stake a portion of its assets, according to the firm’s Wednesday registration statement

article-image

The DAO first voted on enabling SAFE transfers over a year ago

article-image

The final Bitcoin halving, where the mining reward becomes smaller than one satoshi, is expected to occur in 2140

article-image

The Department of Justice and Commodity Futures Trading Commission announced back-to-back lawsuits against KuCoin Tuesday

article-image

Judge Failla found that Coinbase didn’t operate as an unregistered broker in offering its wallet service

article-image

A fund by Laser Digital offers investors exposure to the Polygon network, while a new 21Shares ETP focuses on staking rewards from Toncoin