MakerDAO Proposes to Increase Treasury Bond to $1.25 Billion

Decentralized finance (DeFi) protocol and issuer of the DAI stablecoin MakerDAO has proposed to deploy another round of funds to invest in the United States Treasuries to enable it to take advantage of a favorable yield environment. 

As a DeFi protocol governed by the decentralized autonomous organization (DAO), token holders will be able to vote for or against the proposal, which will determine the company’s action in the end. 

MakerDAO to Extend Treasury Bond Investments 

The platform, which has one of the biggest communities in the DeFi sector, plans to allocate an additional $750 million into a six-month U.S. Treasury ladder strategy with bi-weekly roll-over. The new fund and the $500 million it previously invested in the bonds will bring its total debt ceiling to around $1.25 billion. 

MakerDAO said the ceiling increase would follow the same terms and transaction mechanisms outlined by the MIP65.

According to the proposal, the investment will allow the platform to take advantage of the current yield environment and improve its revenue on Maker’s PSM Assets in a flexible liquid manner which can be adjusted following Maker RWA-related policies.

Execution Strategies

In addition to generating high revenues on Maker’s PSM Assets, the DeFi platform found that the investments also offered additional flexibilities, including transparent asset holdings and large liquid markets, allowing for large-scale quick and low-cost exit/entry of capital. 

“After reviewing various highly liquid money market options, we found that the simple solution of laddering U.S. Treasuries over six months with bi-weekly maturities presents a strong, flexible, and effective solution for Maker: Low cost (trading, custody, etc.) Tax efficiency (including no stamp duty) Inherent liquidity in strategy as U.S. treasuries mature on the ladder,” MakerDAO said in its proposal. 

MakerDAO has mapped out investment strategies pending the approval of the proposal. With $750 million, the protocol plans to buy treasury bonds with maturities split equally over six months. 

The decentralized platform said the execution strategy delivers a net annualized yield of 4.6% after custody and expected trading cost. 

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