MakerDAO Invests $500 Million in Treasuries, Bonds

MakerDAO, the governing body of the Maker Protocol, has initiated steps towards a plan of reallocating $500 million of its stablecoin Dai collateral reserves into short-term United States treasuries and corporate bonds, as reported by Cointelegraph.

According to Cointelegraph, the decentralised autonomous organization (DAO) voted on October 6 to permit a pilot transaction worth one million dollars post an executive vote from Maker tokenholders, with the rest of the funds to go through reallocation post confirmation from the community.

On the basis of information by Cointelegraph, 80% of the $500 million is expected to be invested in short-term US treasuries with allocation of $160 million to the 0-1y Treasury iShares ETF, and $240 million invested into the 1-3 year US Treasury iShares exchange-traded fund (ETF) from BlackRock. The final amount of $100 million is supposed to be allocated to investment-grade corporate bonds supplied by investment management firm Baillie Gifford. MakerDAO is expected to diversify the holdings which collateralise DAI while permitting DAO to deploy unused funds and provide the protocol with extra yield without hampering of MakerDAO’s solvency.

Moreover, Cointelegraph noted that DAI is the stablecoin used by MakerDAO to allow the decentralised finance (DeFi) protocol’s lending of money to users so that the repayable amount can be avoided from being subjected to volatility present within the cryptocurrency markets. Majority of DAI’s nine billion dollars collateralisation pool currently consists of USD Coin, a stablecoin supported by cash and short-date US treasuries. Currently, DAI is overcollateralised at the ratio of 134.87%. Post the announcement, DAI is expected to take a separate direction from comments made by Rune Christensen, co-founder, MakerDAO, who made recommendations on the depegging of DAI from USDC, and making the transition into a decentralised cryptocurrency on account of fears with regard to regulatory crackdowns.

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