Default of Tokenized Loans on Centrifuge Puts MakerDAO’s Investment at Risk

MakerDAO has lent $1.84 million of DAI stablecoin to the tokenized credit pool under distress.

AccessTimeIconAug 25, 2023 at 12:53 p.m. UTC

An impending default of tokenized loans on blockchain-based credit platform Centrifuge has put MakerDAO’s $1.84 million investment at risk of loss, a governance forum post said.

ControlFreight, underwriter of the credit pool under distress, warned Friday that the $2.7 million pool’s largest borrower is facing liquidation due to a legal dispute.

“There is a significant risk of total or partial loss of funds related to the amounts owed to us by Hanhwa AUS Pty Ltd and Hanwha New Zealand Pty Ltd,” ConsolFreight said in the post.

Because of an intellectual property feud, the Australian Supreme Court appointed a liquidator to unwind the company’s activities, freezing all payments to debtors, the post explained.

ControlFreight has minted $1.84 million of DAI from Maker to fund trade finance transactions and freight forwarding invoices.

Maker’s $5.3 billion stablecoin DAI is backed by debt positions overcollateralized by cryptocurrencies – and increasingly, tokenized versions of loans and government bonds – to earn a yield.

A potential loss of Maker’s Centrifuge investment should not destabilize DAI, as its value is supported by roughly $7 billion worth of assets.

However, the development unveils risks about the protocol’s strategy to double down on real-world asset (RWA) investments, including lending to non-crypto businesses. Last month, MakerDAO halted lending to Harbor Trade, another Centrifuge tokenized credit pool manager, after $2.1 million of loans soured without payment on time.

Edited by Stephen Alpher.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.