MakerDAO to invest $500M in US treasury and investment-grade corporate bonds

On Thursday, the largest decentralized finance (DeFi) lending protocol in the world MakerDAO announced that it would invest $500 million in investment-grade corporate bonds and short-term US treasury bonds.

If the pilot transaction following this spell is successful, and Monetalis can draw 1 million DAI from the facility (utilizing the USDC PSM), a subsequent spell will increase the Debt Ceiling to 250 million DAI.

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— Maker (@MakerDAO) October 5, 2022

The plan will see $400 million of the organization’s asset reserves invested in US treasury bonds and $100 million invested in business bonds. It was supported by Tron competitor MakerDAO’s community members in a months-long vote.

MakerDAO has already completed $1M pilot transaction

$1 million pilot transaction has already been completed, and the rest will shortly follow suit. Nadia Alvarez, the Growth head at MakerDAO explained:

“The 80-20 split between treasuries and bonds remained the favored approach during the voting process. This showcases the opportunity associated with the move, and seeing such adamant support from the community is very exciting.”

The conversion of the fourth-largest stablecoin DAI, MakerDAO’s native stablecoin, worth $500 million into US dollars will be managed by DeFi asset advisor Monetalis. While  digital asset bank Sygnum will covert half of the funds, the other half will be handled by investment management company Baillie Gifford. Then, those funds will be allocated to the purchase of corporate and US Treasuries bonds.

The motivation for the investment seems to be an effort to diversify the billions of dollars in funds that are now being used as collateral for DAI, as well as explore ways to make those funds profitable. The majority of Maker’s $9 billion DAI collateral pool is currently invested in USDC, a stablecoin with a zero return on investment by design.

“The generation of yield on our asset reserves allows for the enhancement of the protocol’s capabilities and the ability to secure capital investment,” MakerDAO said today in a statement.

In March, MakerDAO community proposed replacing its native governance token MKR with a new token called stkMKR, as TheCoinRise reported.