MakerDAO could expand its reach closer to the traditional financial space if its proposed integration with a Pennsylvania-based bank is passed this week.
Specifically, MakerDAO is voting on a proposal that would bring a traditional bank into the ecosystem for the first time, allowing the bank to borrow against its assets using features available in DeFi. The proposal involves creating a fund of 100 million DAI for Huntingdon Valley Bank (HVB).
This will essentially help Maker start issuing real-world loans through a fully-backed traditional institution by meeting bank standards.
At the time of writing, there are currently 83.34% of votes in favor and 16.66% against this proposal.
The interaction process between MakerDAO and HVB is described in the following sequence. First, a trust fund (MBPTrust) will be established by the protocol in Delaware to link the existing capital at HVB with the stablecoin DAI that Maker provides. The trust will ensure that the minting/burning of DAI from the Maker vault is done properly and will manage commercial issues with HVB.
In the beginning, HVB will own 50% of the loans issued through the above program but will petition MakerDAO to gradually reduce the ownership rate to a minimum of 5%. The rest will be under the control of MBPTrust.
Besides, HVB will benefit by effectively increasing the legal loan limit to over $7 million per borrower. Assuming the HVB integration is successful after some time, the protocol believes that the same MBPTrust model can be used to apply to other traditional banks.
The proposed integration with HVB bank comes just days after another decision to align more closely with traditional finance. Accordingly, MakerDAO voted in favor of investing $500 million in US Treasury bills.
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