MakerDAO Transfers $500 Million to Coinbase Custody

Crypto lending protocol MakerDAO transferred $500 million to global cryptocurrency exchange Coinbase’s custodial subsidiary, Coinbase Custody. Through this move, MakerDAO ensures an annual rewards rate of 2.6%, which translates to an estimated annual profit of 13 million $DAI.

Regarding the transfer, Coinbase Institutional (@CoinbaseInsto) tweeted:

Yesterday, MakerDAO revealed Coinbase deployed 500 million $DAI from the Coinbase Custody vault. Following the approval of the Coinbase Institutional Rewards proposal by Maker Governance, the funds were converted to $USDC using the PSM (Peg Stabilization Module).

Subsequently, the converted funds were deposited into the specified Coinbase Custody account. Coinbase stated this transfer is the first step in its $USDC institutional rewards program launched in Q4 2022.

Reeling back to April 2023, the MakerDAO community approved a proposal of opening a real-world asset (RWA) vault for Coinbase Custody and then a transfer of up to $500 million in $USDC.

According to the proposal, Coinbase Custody is strictly prohibited from rehypothecating the assets held in the specified account. This means that they are not allowed to lend, reinvest, or utilize the deposited assets in any other manner.

The crypto lending protocol has the ability to withdraw funds from the vault within a 24-hour timeframe, and the funds stored in cold storage are insured up to the limit of $500 million.

Even before that, in October 2022, the MakerDAO community granted approval to a Coinbase proposal, allowing them to custody a maximum of $1.6 billion $USDC through Coinbase Prime. MakerDAO was set to earn a 1.5% reward on its $USDC while holding funds with the institutional custodian.