Bessie Liu

<div id="highlights-block_6305146e1e073" class="highlights">
 <ul>
 <li>MakerDAO formally approved Huntingdon Valley Bank&#8217;s facility in July</li>
 <li>The move is seen as an effort to diversify MakerDAO&#8217;s counterparty risks away from centralized crypto entities</li>
 </ul>
 
</div>



MakerDAO has officially connected its native stablecoin DAI to traditional finance through a partnership with Huntingdon Valley Bank (HVB), a community bank in Philadelphia.&nbsp;



The protocol <a href="https://twitter.com/MakerDAO/status/1562045125768921090" target="_blank" rel="noreferrer noopener">announced</a> today its formal offering to HVB of 100 million DAI, marking the “first commercial loan participation between a US Regulated Financial Institution and a decentralized digital currency.&#8221;



HVB <a href="https://forum.makerdao.com/t/mip6-huntingdon-valley-bank-loan-syndication-collateral-onboarding-application/14219" target="_blank" rel="noreferrer noopener">sought</a> the DAI to support the growth of existing businesses and investments in March, when it formally submitted a MakerDAO onboarding application.&nbsp;



In return, MakerDAO will be able to diversify its counterparty risks and generate yields from its DAI holdings via HVB’s bond managers. 



The initial loan is worth up to $100 million, with the first transaction <a href="https://twitter.com/MakerDAO/status/1562045137999601664" target="_blank" rel="noreferrer noopener">opening</a> up half of the total facility. HVB has the ability to request more capital over the next 12 months.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today is a defining moment to envision the potential of connecting decentralized finance and real-world finance. Huntingdon Valley Bank and Maker pioneer the first commercial loan participation between a U.S. Regulated Financial Institution and a decentralized digital currency. <a href="https://t.co/wajJYVJwwz">pic.twitter.com/wajJYVJwwz</a>&mdash; Maker (@MakerDAO) <a href="https://twitter.com/MakerDAO/status/1562045115828412417?ref_src=twsrc%5Etfw">August 23, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>MakerDAO celebrated its partnership with Huntingdon Valley Bank earlier today.</figcaption></figure>



MakerDAO formally brought in HVB as a new stablecoin vault type in July with a governance vote, which garnered 87% approval — not long after the collapse of Terra and its algorithmic stablecoin UST.&nbsp;



“As demand for crypto leverage is decreasing, rates in the real world are rising, so there’s an opportunity where Maker can mint DAI at a low cost of capital and lend it against really good, robust real-world assets at a higher rate,” TJ Ragsdale, who manages real-world assets at MakerDAO, <a href="https://cms.blockworks.co/makerdao-adopts-real-world-assets-as-crypto-leverage-demand-wanes/" target="_blank" rel="noreferrer noopener">told Blockworks in July</a>.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Revenue coming from the real world can offset some of the revenue we’ve lost from crypto,” he said.</blockquote>



Not to mention, recent <a href="https://cms.blockworks.co/makerdao-plans-to-yolo-usdc-into-eth/" target="_blank" rel="noreferrer noopener">sanctions on crypto mixer</a> Tornado Cash have caused members of the MakerDAO governance to become wary of its stablecoin being too reliant on centralized stablecoin issuers, particularly Circle.



Indeed, the protocol remains torn between ideologies of centralization and decentralization. But moves like these — facilitating loans to traditional finance — are all the more critical for MakerDAO moving forward.



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