MakerDAO voting on $100M loan participation with Florida commercial bank

Crypto lending platform MakerDAO is voting on a new proposal to bring another commercial bank into its ecosystem, strengthening the connection between decentralized finance (DeFi) and traditional finance. 

As per MakerDAO’s governance forum, Cogent Bank, a Florida commercial bank, is proposing to participate with $100 million in loans to MakerDAO’s RWA Master Participation Trust.

The proposal is part of MakerDAO’s monthly governance cycle, and seeks the same terms and conditions applied to Pennsylvania-based bank Huntingdon Valley Bank (HVB). HVB entered into a collateral integration with the crypto firm in July 2022, allowing the bank to borrow against its assets using DeFi.

Under the same conditions, MakerDAO will use its trust arm to link the capital available at Cogent Bank with the Dai (DAI) stablecoin issued by MakerDAO. The trust entity will be responsible for ensuring DAI minting and destruction from the vault, as well as managing the partnership with the Bank.

Cash flow diagram – Maker Vault/Cogent Bank. Source: MakerDAO’s forum

The DeFi protocol would gain exposure to the credit market in at least eight categories, including commercial real estate, industrial, life insurance, consumer, and public finance, with loans issued mostly on a fixed-rate basis.

Among the revenue sources for MakerDAO are fees associated with maintaining the vault, minting DAI, and yields. The benchmark 30-day average Secured Overnight Financing Rate (SOFR) stood at 4.15% as of Jan. 5.

Before its acquisition in 2018, Cogent Bank was known as Pinnacle Bank. The Florida bank has $1.3 billion of assets under management, and it is insured by the Federal Deposit Insurance Corporation (FDIC). According to the company, loans originated in the first three quarters of 2022 totaled $602 million, and summed to $873 million in 2021.

In a bid to endure the crypto winter last year, MakerDAO disclosed a governance process for its first collaboration with a traditional bank – Huntingdon Valley Bank. At that time, the DeFi protocol announced plans to onboard other banks depending on the results of its integration with HVB.

All Dutch and English crypto news!

‘How did this happen’ — Powell says Fed stumped over the collapse of SVB

United States Federal Reserve chairman Jerome Powell has conceded that his regulator was blindsided by the sudden collapse of Silicon Valley Bank (SVB), despite it...

FTX seeks to claw back $460M from Bankman-Fried-backed VC firm

Bankrupt crypto exchange FTX is seeking to recover $460 million of allegedly misappropriated customer funds from venture capital (VC) firm Modulo Capital, which received a...

Coinbase receives a Wells notice from the U.S. SEC

U.S. SEC issued a Wells notice to Coinbase on Wednesday. Coinbase chief legal officer Paul Grewal's remarks in response. Coinbase stock slipped more than 10% in extended...

Coinbase could face SEC enforcement action for ‘potential violations of securities law’

Crypto exchange Coinbase said it received a 'Wells Notice' from the United States Securities and Exchange Commission recommending the regulator take enforcement action. In a March...

Beste exchanges

Koop je crypto bij Bitvavo