Crypto exchange Coinbase announced on Monday that MakerDAO, the governing body behind the decentralized finance platform Maker, approved the proposal to transfer $1.6 billion denominated in USDC to its custody program Coinbase Prime. This move will allow the protocol to earn a 1.5% reward on the deposited funds.
The proposal passed with 75% of votes in favor. The $1.6 billion USDC represents one-third of the DAO’s Peg Stability Module (PSM), which allows users to deposit USDC and mint DAI, the protocol’s native stablecoin.
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“This proposed collaboration with Coinbase follows an approved signal of intent by the MakerDAO community to increasingly invest Maker’s collateral into short-term bonds. It was agreed that any collateral deployed should meet the criteria of offering safety, cost structure, and flexibility,” said Jennifer Senhaji, Growth and Business Development Manager at MakerDAO.
According to the proposal, MakerDAO won’t pay a custody fee. On top of that, the community will get to vote on whether to keep the funds with Coinbase at the end of the year.
Coinbase Prime is the leading institutional prime broker platform for crypto assets. MakerDAO’s decision to move $1.6 billion in USDC to the program has almost doubled the amount of USDC Coinbase held on behalf of its customers, which was $1.7 billion in the second quarter of 2022.
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“In addition to Coinbase’s established reputation, it has been a longstanding partner of MakerDAO. The additional monthly revenue generated through this deal enables Maker to further advance its overarching mission to create a global, trustless financial future built on decentralized rails,” said Senhaji.
MakerDAO has recently been hit with a crash in revenue amid weak loan demand and slowing liquidations. According to Messari, the protocol saw an 86% drop in revenue in the third quarter of 2022, with revenue from ETH- and BTC-based assets falling by 74% and 66% respectively.
To amend this and generate more revenue, MakerDAO has been looking at where to park its unused treasury funds. A few weeks ago, the community voted in favor of investing $500 million in US treasuries and corporate bonds.
Maker is the largest decentralized finance protocol, with $7.75 billion in total value locked (TVL), according to DefiLlama. MakerDAO’s governance token MKR is currently trading at $922, down 85% from its all-time high of $6,292, according to CoinGecko.
On the Flipside
- Some criticize MakerDAO’s move, saying that it’s a step towards centralization, just like the recent decision to invest $500 million in US treasuries and corporate bonds.
Why You Should Care
MakerDAO is the largest decentralized finance platform in the market. It’s also the largest single holder of USDC. MakerDAO has substantial influence over how other similar DeFi projects make their financial decisions.
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