Stablecoin Issuer MakerDAO Proposes Additional $750M U.S. Treasury Purchase

MakerDAO, the decentralized autonomous organization (DAO) behind the stablecoin DAI, is reviewing a proposal that would allocate an additional $750 million to invest in U.S. Treasurys as it looks to take advantage of a favorable yield environment. If passed, the resolution would add to the $500 million approved last October, brining the ceiling to $1.25 billion.

The new proposal would have the DAO investing in 6-month U.S. Treasurys using a ladder strategy with a biweekly rollover, meaning the purchased notes will have maturities that are equally split over the full period. The strategy would be flexible and Maker could move to a more complex or different ladder scheme, if needed.

DAOS are groups organized around a shared purpose or idea. These groups don’t have central leadership, but instead have community votes making decisions and software carrying out those decisions. Maker’s first U.S. Treasurys investment aimed to help further stabilze its DAI stablecoin, which was already overcollateralized at the time. However, stablecoins in general took a reputational hit when Terra’s stablecoin collapsed early last year.

“After review of various highly liquid money market options, we found that the simple solution of laddering U.S. Treasurys over a 6- month period with bi-weekly maturities presents a strong, flexible and effective solution for Maker,” wrote Allan Pederson, CEO of decentralized finance (DeFi) asset manager Monetails, in a post. He noted that the advantages to the strategy included the low cost, tax efficiency and inherent liquidity as the treasuries mature on the ladder.

Pederson said Maker expects to see partner BlockTower proposing a similar allocation structure soon, but notes that Monetails requested that the allocation happen immediately to take advantage of the current yield environment. However, Monetails doesn’t act as asset manager or investment advisor or have any influence on the purchase of the Treasurys. The asset strategy will instead be handled by Sygnum Bank.