MakerDAO buys $700M in US Treasury bonds

Upland: Berlin Is Here!

MakerDAO, the group behind the DAI stablecoin, has bought $700 million value of U.S. Treasury bonds, bringing the DAO’s whole Treasury bond holdings to $1.2 billion.

The MakerDAO neighborhood had already held the preliminary vote to extend its U.S. Treasury bond holdings from $500 million to $1.25 billion in March.

The proposal handed with 77.13% of the vote in favor and included a plan to spend the extra $750 million on U.S. Treasuries. These treasuries have been to be “bought with maturities equally cut up over six months such that, bi-weekly, an identical quantity of US Treasuries mature (i.e., 12 “slots” over six months – i.e., 750M/12 = 62.5M per slot).”

As a part of its bond technique, MakerDAO has additionally carried out a six-month U.S. Treasury ladder technique involving bi-weekly roll-overs. This strategy permits the group to capitalize on the present yield setting and increase its income.

The acquisition was carried out by Monetalis Clydesdale Vault, a digital asset supervisor, on behalf of MakerDAO.

Allan Pedersen, CEO of Monetalis Group, acknowledged that this enhance in MakerDAO’s publicity to real-world belongings represents a “sturdy, dependable, and versatile answer” that may generate extra income for the protocol.

In the meantime, stablecoin issuer Circle has restarted its buying of U.S. Treasury payments as a reserve asset for its Circle Reserve Fund (managed by BlackRock).

Circle had beforehand deserted all its short-term Treasury holdings amid the U.S. debt ceiling standoff final month, with CEO Jeremy Allaire citing the “potential breach of the power of the U.S. authorities to pay its money owed” as the explanation.

Hedging bets

This current buy aligns with the group’s plans to extend its publicity to such belongings, as outlined in a proposal launched in March 2023.

This determination was a part of MakerDAO’s effort to develop into extra resilient following an incident the place its stablecoin, DAI, briefly misplaced parity with the U.S. greenback, falling to $0.89 on March 11, at some point after the failure of Silicon Valley Financial institution.

SVB’s collapse impacted a number of main stablecoins, together with Circle’s USDC, which DAI makes use of in its Peg-Stability Module (PSM). As a response, MakerDAO had deliberate to diversify from USDC by investing a portion of the USDC in its PSM to accumulate the proposed $750 million of Treasury bonds.

MakerDAO’s U.S. Treasury bond technique is just not a brand new enterprise for the group. The DAO first bought $500 million value of bonds in October 2022, seeing it as a method to diversify its collateral pool with low-risk, conventional belongings.

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