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(Kitco News) – Decentralized finance (DeFi) protocol MakerDAO, which is responsible for issuing the DAI stablecoin, has started the process of allocating $500 million of its stablecoin reserves into short-dated US Treasuries. term and high quality corporate bonds.
The project community voted to approve the move, which will begin with a $1 million pilot transaction on Wednesday. Once the pilot project is deemed successful, the rest of the investment will be transferred in the coming days.
The DeFi protocol said the switch was being made as a way to diversify its balance sheet by adding exposure to low-risk liquid traditional assets, limiting exposure to a single asset and increasing revenue.
To facilitate the allocation, MakerDAO has selected Sygnum, the world’s leading digital asset bank, as a lead partner in this venture. During the first phase, Sygnum will work with BlackRock Switzerland to invest $250 million in a portfolio of BlackRock iShares ETFs.
“This portfolio diversification tangibly demonstrates the innovation and real benefits that traditional assets bring to the DeFi-enabled financial revolution,” according to MakerDAOs Europe Head of Growth Rajiv Sainani. “This collaboration is another step towards a world where technology creates new and better financial models.”
Going forward, the DAO intends to invest 80% of its allocation in short-term US Treasuries, of which 40% will be in the ETF 0-1y US Treasury isshares while the remaining 60% will be invested in the ‘ETF 1-3y US Treasury isshares. by BlackRock.
The remaining 20% of the total allocation will be invested in IG corporate bonds, including a “US Treasury Index split and an active global mandate for 0-5 year investment grade corporate bonds by Baillie Gifford”, MakerDAO said.
“The 80-20 split between Treasuries and bonds remained the preferred approach during the voting process. This showcases the opportunity associated with the move, and to see such strong community support is very exciting” , said Nadia Alvarez, head of MakerGrowth.
MakerDAO has also partnered with Monetalis, an asset advisory firm that will help the protocol form an acceptable legal structure to allow exposure to traditional assets.
DAI was originally founded in 2017 as a decentralized stablecoin backed by Ether (ETH) and other top crypto assets. Over the past year, MakerDAO has shifted its strategy to include real-world assets in its treasury to diversify its exposure and risk.
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