Stablecoin Issuer MakerDAO Allocates $500M for Treasuries, Corporate Bond Investment
The community governing MakerDAO, a decentralized autonomous organization (DAO) behind stablecoin DAI, has allocated $500 million for investing in U.S. short treasuries and corporate bonds.
The "strategic investment" will be converted from its overcollateralized stablecoin, with 80% going towards U.S. short term Treasuries and the remaining 20% to investment grade corporate bonds. MakerDAO's community voted in favor of the allocation proposal, which was presented in late June.
Stablecoins and their collaterals have been the subject of recent debate ever since the implosion of the $40 billion Terra ecosystem and its stablecoin UST, which sent whiplashes in the crypto market.
The move is aimed at diversifying MakerDAO’s balance sheet into "scalable legacy finance investments, limiting exposure to any one asset and expanding revenue streams" and will be initiated by decentralized finance (DeFi) asset advisor Monetalis. MakerDAO said that it has carried out a $1 million transaction with the remaining investment to follow.
DAO are entities with no central leadership and whose decisions are carried out by software rather than human managers. DeFi is an umbrella term for lending, trading and other financial activities carried out on a blockchain without traditional middlemen.
The development could be seen as a successful example of decentralized governance participation and an effort by the industry to give more stability to the tainted algorithmic stablecoins. MakerDAO’s stablecoin DAI is decentralized but also overcollateralized – backed by ether (ETH) deposited into its smart contracts.