In a First-of-Its-Kind Move, DeFi Protocol Maker Is Bringing a Traditional Bank Into Its Ecosystem
- The MakerDAO community is voting on a proposal to add a 100 million DAI debt ceiling participation facility of Huntingdon Valley Bank (HVB) as a vault.
- So far, the majority have voted in favor of the addition.
- MakerDAO has also voted to invest $500 million in DAI into U.S. treasuries and corporate bonds.
The MakerDAO community is voting on its first proposal that would bring a traditional bank into its ecosystem. The proposal has 78% in favor of the addition of the bank’s syndicated loan as a vault type, and there are no negative votes so far. There are two days remaining for voting.
The first collateral integration from a US-based bank in the DeFi ecosystem is getting closer.— Maker (@MakerDAO) July 4, 2022
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
Should the vote succeed, it would be the first collateral integration between a U.S. bank and the DeFi ecosystem. This would allow the bank to borrow against its assets using DeFi. This could have enormous ramifications, at least as far as convincing others to do the same.
The bank in question is Huntingdon Valley Bank (HVB), which has $500 million in assets. MakerDAO was rumored to be thinking about working with the bank in March 2022, and the anticipation has not reduced since.
MakerDAO is poised to catch the eye of other banks if this experiment goes well. It would be a gateway into DeFi for many banks and offer loan syndication options, which can increase revenue and ameliorate credit risk.
The project is conducting this operation at a time when many are distrustful of the crypto market, but it could change how traditional finance views crypto. If MakerDAO and DeFi can successfully offer solutions to banks and other financial institutions, then that perception may change quickly.
Crypto Market and TradFi Growing Closer
The crypto market is currently in a bearish phase, with many hoping that bitcoin and other assets can pull themselves out of the rut. Many are turning to more stable and risk-free assets to ensure that the funds keep flowing in, and MakerDAO itself has been working on this.
MakerDAO also voted on using $500 million DAI to invest in safe investment strategies like U.S. treasury bills and bonds. 80% of the funds will either go into U.S. treasuries and 20% into corporate bonds.
The crypto market is dealing with the effects of the bankruptcy of Three Arrows Capital and the financial issues of Celsius Network. The use of traditional banks and investment assets could spell a new era for the crypto market, which is also set to experience a great deal of regulation in 2022.
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