MakerDAO, the issuer of the stablecoin DAI, has initiated the first step toward allocating $500 million of its stablecoin reserves into short-term US treasury bonds and investment-grade corporate bonds.
The decentralized autonomous organization (DAO) approved a $1 million pilot transaction Wednesday following an executive vote by Maker token holders. The full investment is to follow in the coming days.
MakerDAO explained the move as a way to strengthen the project’s balance sheet with exposure to low-risk liquid traditional assets. For this allocation, the DAO has partnered with an asset advisor firm called Monetalis. This firm will act as the asset advisor as well as form an acceptable legal structure for the Maker DAO protocol to gain exposure to traditional assets.
Here, the DAO aims to invest 80% of the allocated sum into short-term US treasury bonds whereas the remaining 20% would be invested into corporate bonds.
“The 80-20 split between treasuries and bonds remained the favored approach during the voting process. This showcases the opportunity associated with the move, and seeing such adamant support from the community is very exciting,” said Nadia Alvarez, head of MakerGrowth.
Monetalis’ allocation of $500 million stablecoin will be divided equally between investment management firms Sygnum Bank and Baillie Gifford via Monetalis. This will take place in two phases, MakerDAO noted.
In the first phase, asset management firm Sygnum will serve as a crypto-to-fiat gateway and help convert 250 million of MakerDAO’s stablecoin into U.S. dollars, which will then be diversified into traditional assets.
MakerDAO founded DAI in 2017 as a decentralized stablecoin backed with ether (ETH) and other crypto collaterals to back DAI. In the last year, MakerDAO has pivoted to a strategy of diversifying its treasury into real-world assets (RWAs).
Currently, DAI is the fourth-largest US dollar stablecoin with a market capitalization of over $6.3 billion, per CoinGeko data.
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Vishal Chawla is a reporter who has covered the ins and outs of the tech industry for more than half a decade. Prior to joining The Block, Vishal worked for media firms like Crypto Briefing, IDG ComputerWorld and CIO.com. Follow him on Twitter @vishal4c.