MakerDAO buys $700M in US Treasury bonds

MakerDAO, the organization behind the DAI stablecoin, has purchased $700 million worth of U.S. Treasury bonds, bringing the DAO’s total Treasury bond holdings to $1.2 billion.

The MakerDAO community had already held the preliminary vote to increase its U.S. Treasury bond holdings from $500 million to $1.25 billion in March.

The proposal passed with 77.13% of the vote in favor and included a plan to spend the additional $750 million on U.S. Treasuries. These treasuries were to be “purchased with maturities equally split over six months such that, bi-weekly, a similar amount of US Treasuries mature (i.e., 12 “slots” over six months – i.e., 750M/12 = 62.5M per slot).”

As part of its bond strategy, MakerDAO has also implemented a six-month U.S. Treasury ladder strategy involving bi-weekly roll-overs. This approach allows the organization to capitalize on the current yield environment and boost its revenue.

The purchase was carried out by Monetalis Clydesdale Vault, a digital asset manager, on behalf of MakerDAO.

Allan Pedersen, CEO of Monetalis Group, stated that this increase in MakerDAO’s exposure to real-world assets represents a “strong, reliable, and flexible solution” that will generate more revenue for the protocol.

Meanwhile, stablecoin issuer Circle has restarted its purchasing of U.S. Treasury bills as a reserve asset for its Circle Reserve Fund (managed by BlackRock).

Circle had previously abandoned all its short-term Treasury holdings amid the U.S. debt ceiling standoff last month, with CEO Jeremy Allaire citing the “potential breach of the ability of the U.S. government to pay its debts” as the reason.

Hedging bets

This recent purchase aligns with the organization’s plans to increase its exposure to such assets, as outlined in a proposal released in March 2023.

This decision was part of MakerDAO’s effort to become more resilient following an incident where its stablecoin, DAI, briefly lost parity with the U.S. dollar, falling to $0.89 on March 11, one day after the failure of Silicon Valley Bank.

SVB’s collapse impacted several major stablecoins, including Circle’s USDC, which DAI uses in its Peg-Stability Module (PSM). As a response, MakerDAO had planned to diversify from USDC by investing a portion of the USDC in its PSM to acquire the proposed $750 million of Treasury bonds.

MakerDAO’s U.S. Treasury bond strategy is not a new venture for the organization. The DAO first purchased $500 million worth of bonds in October 2022, seeing it as a way to diversify its collateral pool with low-risk, traditional assets.