MakerDAO, one of the largest platforms in decentralized finance, has announced a possible partnership with a traditional bank. This will be the first time the DeFi platform will work with the traditional banking sector to borrow money against its assets.
MakerDAO set to partner with a traditional bank
MakerDAO has submitted a proposal for the community to approve this partnership. 83% of voters have voted in favor of this proposal, with the voting expected to end on July 7 at 12:00 PM EST.
This proposal will create a vault of 100 million DAI for Huntingdon Valley Bank (HVB). This vault will be a form of collateral within the MakerDAO Protocol. With this vault in place, it will be possible for the Maker Protocol to start issuing real-world loans to borrowers using a traditional institution that is fully backed.
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In the recent announcement, MakerDAO said that this was the first move towards obtaining the first collateral integration from a bank based in the United States. Recently, the MakerDAO community voted in favor of spending $500 million worth of DAI and investing in treasuries and corporate bonds.
MakerDAO is behind the Maker Protocol that issues a stablecoin pegged to the US dollar in exchange for user deposits made in Ether (ETH) and around 30 different cryptocurrencies. DAI is among the oldest stablecoins in the market, and its focus on over-collateralization has been behind it maintaining its peg over the years.
Deal with Huntingdon Valley Bank
This partnership with HVB is necessary for the Maker Protocol, as the platform is not allowed to issue loans made in US dollars. To facilitate the partnership, MakerDAO plans to partner with a traditional bank.
MakerDAO plans to establish a Multi-Bank Participation Trust to bring the available capital from DAI to HVB. The trust will ensure that minting from this vault is conducted correctly and that commercial issues arising with HVB will be managed.
In the initial phase, HVB will own half of the loans issued through the scheme. It will also require MakerDAO to reduce ownership to around 5%. The remaining share will go to MBPTrust. MakerDAO will generate revenues from the vault stability fees. These fees will come from maintaining the vault and minting the DAI stablecoin. Additional revenues will also be generated from yield.
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