Capital markets News

DeFi protocol Maker to invest $400m in BlackRock ETFs

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Digital asset bank Sygnum announced it is the lead partner for a $500 million asset diversification by the Maker protocol, the DeFi initiative known for the DAI stablecoin. Eighty percent will be invested in BlackRock ETFs.

Maker has been investing in real world assets for years but has ramped up activities this year. In August, it announced a $100 million funding of loan participations with Philadelphia-based Huntingdon Valley Bank. Societe Generale Forge has also been discussing a $30m refinancing of a covered bond that was issued as a security token.

Regarding today’s news, Maker plans to invest the first tranche of $250 million in BlackRock fixed income iShares ETFs particularly ones focused on short term Treasuries. The future plan is for another $150 million in BlackRock Treasury ETFs and $100 million in corporate bonds to be managed by Baillie Gifford.

There are more than $6.7 billion of DAI stablecoins in circulation, backed by $9.1 billion in collateral. A considerable portion of that collateral is invested in the USDC stablecoin that doesn’t provide a yield.

In a little bit of irony, BlackRock is an investor in Circle, the company behind USDC. And BlackRock ETFs will be bought by selling USDC.

“This portfolio diversification tangibly demonstrates the innovation and real-world benefits traditional assets are bringing to the DeFi-enabled finance revolution,” said Rajiv Sainani, MakerDAO Europe Growth Lead.

“The deal’s end-to-end solution called for a counterparty with a banking licence who could acquire the ETFs and also provide institutional-grade custody for both crypto and traditional assets. Sygnum’s DeFi credentials, regulated banking experience and two-way crypto-traditional finance bridge were considered critical in securing the Maker community’s overwhelming support.”

As a decentralized protocol governed by a decentralized autonomous organization (DAO), decisions like this are put to a community vote. There were votes on whether to go ahead with the $500m diversification and on the makeup of the assets. The proposal was initiated by Monetalis, a wholesale lender. For its efforts, it earns 0.15% of the assets annually or $750,000.

Sygnum has a banking license in Switzerland and a capital markets license in Singapore. In January, it raised $90 million at an $800 million valuation. The bank has been involved in multiple securities tokenization initiatives and operates a digital asset fund alongside Japan’s SBI and Italy’s Azimut.

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