MakerDAO, the organization behind the DAI stablecoin, has purchased $700 million worth of US Treasury bonds, bringing the DAO’s total holdings of Treasury bonds to $1.2 billion.
The MakerDAO community had already held the preliminary vote in March to increase its holdings of US Treasury bonds from $500 million to $1.25 billion.
The proposal passed with 77.13% of the vote and included a plan to spend the additional $750 million in U.S. Treasury bonds. These Treasury bonds would be “purchased with maturities evenly spaced over six months so that a comparable number of U.S. Treasury bonds mature every two weeks (i.e. 12 slots over six months – i.e. 750 million / 12 = 62.5 million per slot). ”
As part of its bond strategy, MakerDAO has also implemented a six-month US Treasury ladder strategy with bi-weekly rollovers. This approach allows the organization to take advantage of the current yield environment and increase revenue.
The purchase was made 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 once again started purchasing US Treasury bills as reserve for its Circle Reserve Fund (managed by BlackRock).
Circle had previously given up all of its short-dated government bonds amid the US debt ceiling stalemate last month, with CEO Jeremy Allaire citing the “possible violation of the US government’s ability to service its debts” as the reason.
Hedging bets
This recent purchase is in line 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 after an incident in which its stablecoin, DAI, briefly lost parity with the US dollar, falling to $0.89 on March 11, a day after Silicon Valley Bank’s bankruptcy.
The collapse of SVB affected several major stablecoins, including Circle’s USDC, which uses DAI in its Peg-Stability Module (PSM). In response, MakerDAO planned to diversify away from USDC by investing some of the USDC in its PSM to acquire the proposed $750 million in government bonds.
MakerDAO’s US Treasury bond strategy is not a new venture for the organization. The DAO first bought $500 million worth of bonds in October 2022, seeing it as a way to diversify its collateral pool into traditional, low-risk assets.