Maker Protocol is not currently allowed to provide direct loans in US dollars to borrowers, hence, this collaboration with HVB is a huge milestone.
MakerDAO has reportedly decided to integrate a traditional bank into its ecosystem, a proposal being decided through voting. This follows its recent decision concluded by the MakerDAO community through voting to invest 500 million DAI into the US treasuries and bonds. The company explained that 80% of the funds will be invested in US treasuries while 20% go into corporate bonds.
With its bank integration, 83% of the voters are currently in favor of the proposal. Voting ends at noon EST on July 7. As stated in the proposal, there is a demand for the creation of a vault with 100 million DAI for Huntingdon Valley Bank (HVB) as part of the new collateral type under the Maker protocol. In this case, the Maker protocol will be able to offer real-world loans to borrowers. This will be done through supported traditional institutions.
It is important to note that the MakerDAO manages the Maker Protocol. It generates DAI stablecoins pecked to the US dollar in exchange for Ether deposited by users. This does not only applies to Ether, but also to about 30 other cryptos. Huntingdon Valley Bank (HVB) is a traditional Pennsylvania bank and has about $500 million in assets.
Maker Protocol is not currently allowed to provide direct loans in US dollars to borrowers, hence, this collaboration with HVB is a huge milestone. The report explains that MakerDAO will attempt to connect the fund accessible at the HVB with the DAI stablecoins by forming a Multi-Bank Participation Trust (MBPTrust) in Delaware. The Trust would take care of commercial issues with HVB, and also overseas DAI minting and destruction from the Vault. It was further disclosed that HVB would hold 50% of the loan and would later ask MakerDAO to lower its ownership to a 5% minimum. The balance would then be owned by MBPTrust.
Because the bank will be offering loans under Pennsylvania law through the Maker Protocol, its risk would reduce. The successful implementation would get other banks to test the Defi ecosystem. This would also provide loan syndication opportunities to enhance revenue and reduce credit risk. The current crypto industry is still in the stage of finding its way around regulations. It is expected that the MakerDAO and Defi integration may accelerate the crypto adoption rate.
Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
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