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

The decentralized autonomous organization behind the DAI token previously purchased $500 million worth of government notes and bonds.

AccessTimeIconMar 7, 2023 at 5:15 p.m. UTC
Updated May 9, 2023 at 4:09 a.m. UTC

MakerDAO, the decentralized autonomous organization (DAO) behind the DAI stablecoin, 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 in October, bringing the ceiling to $1.25 billion.

The new proposal would have the DAO investing in six-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 to make decisions and use software to carry out those decisions. Maker’s first U.S. Treasurys investment was intended to help further stabilize its DAI stablecoin, which was already overcollateralized at the time. However, stablecoins in general took a reputational hit when Terra’s UST 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 six-month period with biweekly 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 the advantages to the strategy include the low cost, tax efficiency and inherent liquidity as the Treasurys mature on the ladder.

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


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