U.S. Bank Will Collaborate With MakerDAO To Borrow $100 Million

Ethereum’s decentralised financial system MakerDAO suggested a historic vote to link the Huntingdon Valley Bank to its platform. The idea has been accepted by the community, and the financial institution will have access to an initial debt cap of $100 million.

With 87 percent of the vote, the new MakerDAO Vault Type with the financial institution was authorised. This amounted to more than 117 thousand MKR tokens, as opposed to the 4,200 tokens used to reject the plan. In this section, proponents explain:

Huntingdon Valley Bank, a community bank situated in Pennsylvania, seeks a DAI debt ceiling participation facility in the amount of $100 million to promote the expansion of current and new enterprises. The relationship between HVB and RWA Master Participation Trust (formed for the benefit of Maker) will not be one of borrower and lender.

The U.S. bank will have access to liquidity in the form of the stablecoin DAI in return for the selling of participation interests in the underlying full loans by HVB. The financial organisation specialises in providing fixed and adjustable-rate mortgages for residential and commercial properties.

This relationship will allow the bank to propose possible investments in which MakerDAO may participate via the RWA Master Participation Trust. Thus, the DeFi protocol may have a stake and participate in this process in the actual world.

Voting and cooperation with the Huntingdon Valley Bank are significant since it is the first time the DeFi protocol would finance loans via an American financial institution. The maker explained through its Twitter account:

Ankura Trust, the calculating agent, will guarantee that proposed loan participations are eligible for financing when HVB submits loans for participation. If participations comply, the Trust will acquire a (maximum) 50% stake in the underlying loan in return for cash by completing a Certificate of Participation (…).

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The plan identifies some dangers, but the proponents think the HVB will have sufficient skin in the game to minimise them. According to the plan, the financial institution has a positive rapport with U.S. authorities and employs a “conservative” business approach.

In this situation, the advantages exceed the possible hazards. Voting on MakerDAO seems to mirror this opinion.

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