Ethereum’s decentralized financial protocol MakerDAO has proposed a historic vote to connect US banks to its platform, Hunting Don Valley Bank (HVB). The community will approve the proposal and financial institutions will have access to the $ 100 million initial debt cap.
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The financial institution’s new Maker DAO Vault Type was approved with 87% of the votes. This made up over 117,000 MKR tokens, in contrast to the 4,200 used to oppose the proposal.Among them, supporters explanation:
Huntingdon Valley Bank, a Pennsylvania-based community bank, is seeking 100 million DAI debt cap participation facilities to support the growth of existing businesses and grow new ones. HVB and RWA Master Participation Trust (established for the benefit of the manufacturer) do not have a borrower-lender relationship.
The step will give US banks access to liquidity in the form of Stablecoin DAI in exchange for a “sale of participating interests in all underlying loans” from HVB. Financial institutions focus on creating fixed and variable mortgages and commercial mortgages.
This partnership will allow banks to submit potential desires for MakerDAO to participate through the RWA Master Participation Trust. Therefore, the DeFi protocol has a stake in this process and can actually participate.
Voting and the Hunting Don Valley Bank partnership is historic and is the first DeFi protocol to fund loans through a US-based financial institution. Through the Twitter handle, Maker has clarified the following:
When the HVB proposes a loan for participation, the calculation agent Ankura Trust ensures that the proposed loan participation is eligible for funding. If the participation is matched, the trust will earn (…) 50% interest on the underlying loan by executing the participation certificate in exchange for cash (…).
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The suggestions specify the risks, but the proponents believe that the game has enough skins for HVB to mitigate them. Financial institutions have good relationships with US regulatory agencies and claim that the proposal operates on a “conservative” business model.
In this particular scenario, the profit outweighs the potential risk. The MakerDAO vote seems to reflect this perception.
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Working with traditional financial institutions has the potential to pave the way for future innovation and expansion of MakerDAO. The DeFi protocol and its community have access to real assets and may create an HVB liquidity pool. In addition:
Opportunities are wholesale lending, scale, coordination, symbiosis, and turnkey solutions (…) If approved, this agreement between the DeFi protocol and US banks will create a new chapter in history. This transaction represents the first major partnership between a regulated US bank and DeFi.