The cryptocurrency lending platform MakerDAO is holding a vote on a new proposal to include another commercial bank into its ecosystem. This would improve the relationship between conventional finance and decentralized finance (DeFi).
According to the announcement made in the governance forum of MakerDAO, the Florida-based commercial bank Cogent Bank is considering making a contribution of one hundred million dollars in the form of loans to MakerDAO’s RWA Master Participation Trust.
The proposal is a part of MakerDAO’s monthly governance cycle, and it seeks to apply the same terms and conditions that were applied to the Pennsylvania-based bank Huntingdon Valley Bank (HVB). HVB entered into a collateral integration with the cryptocurrency company in July 2022, which allowed the bank to borrow against its assets utilizing DeFi. The proposal is a part of MakerDAO’s governance cycle, and it seeks to apply the same terms and conditions.
Under the same set of circumstances, MakerDAO would utilize its trust arm to connect the money that is readily accessible at Cogent Bank with the MakerDAO stablecoin known as Dai (DAI). The trust entity would be in charge of administering the cooperation with the bank in addition to being accountable for overseeing the minting and destruction of DAI from the vault.
The DeFi protocol would get credit market exposure in at least eight different categories, some of which include commercial real estate, industrial, life insurance, consumer, and public finance. The majority of loans would have a set interest rate attached to them.
Fees that are charged for maintaining the vault, fees that are charged for minting DAI, and yields are all sources of income for MakerDAO. As of the 5th of January, the standard rate for the 30-day average of secured overnight lending was 4.15 percent.
Pinnacle Bank was the previous name of what is now known as Cogent Bank prior to its purchase in 2018. The Federal Deposit Insurance Corporation backs the Florida financial institution, which oversees assets worth $1.3 billion and is guaranteed by the agency. According to the information provided by the firm, the entire amount of loans that were initiated in the first three quarters of 2022 was $602 million, while in 2021 the whole amount was $873 million.
MakerDAO has released a governance framework for its first partnership with a regular bank, which will be Huntingdon Valley Bank. This move was made in an effort to weather the crypto winter in 2022. At that time, the DeFi protocol had indicated its intentions to onboard more banks, but these ambitions were contingent on how well its integration with HVB went.