MakerDAO is voting on collaborating with traditional banks and could extend its arm into the traditional finance space if the proposal passes this week so let’s have a closer look at our latest cryptocurrency news.
MakerDAO is voting on a proposal that can bring the traditional banks into the ecosystem for the first time which will also allow banks to borrow against the assets using decentralized finance. Right now, 83% of voters are in favor of the proposal. The proposal involves creating a vault with 100 million DAI for Huntingdon Valley Bank as a part of the new type in the Marker Protocol. This will allow the protocol to start issuing real-world loans to borrowers via a fully backed traditional institution by meeting the bank’s standards. The move to integrate the bank came on hot heels of another decision to become even more entwined with the traditional finance space after members of the protocol were in favor of spending $500 million DAI investing in treasuries and bonds earlier his week.
The first collateral integration from a US-based bank in the DeFi ecosystem is getting closer.
The Maker Governance votes to add RWA-009, a 100 million DAI debt ceiling participation facility proposed by the Huntingdon Valley Bank, as a new collateral type in the Maker Protocol pic.twitter.com/fOdusdjCFS
— Maker (@MakerDAO) July 4, 2022
MakerDAO governs the Maker Protocol which issues US-dollar pegged DAI stablecoins in exchanges for the user deposits of ETH and about 30 other cryptocurrencies. The Huntingdon Valley Bank is a traditional bank founded in 1871 in Pennsylvania. The deal is very important for the Maker protocol because it’s nto allowed yet to issue US dollar loans directly to the borrower. However, the entity will be established by MakerDAO to make integration with the bank possible.
The Multi-bank Participation Trust will be established by the MakerDAO in Delaware and will ink it to the capital available at HVB with the DAI stablecoin that Maker provides. The trust will ensure that the DAI minting and destruction from the vault are carried out in the right way and will manage commercial issues with HVB. HVB will own 50% of the loan issues but will later petition MakerDAO to reduce the ownership down to 5%. The remainder will be owned by MBPTrust and the measure will mitigate the bank’s risks as it will be issuing loans via the Maker Protocol under the law in Pennsylvania.
Maker Protocol has been trying to find strategies to weather the bear market and becomes able to read revenues via vault stability fees associated with maintaining the vault and minting the DAI stablecoin. The revenue will come from yield which is estimated to be 75 basis points above the 30-day average Secured Overnight Financing rate. The HVB benefits by increasing the legal lending limit beyond $7 million. Assuming that the HVB integration is a success, MakerDAO believes the same trust could be used to onboard other banks in the future.
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