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FINTECH

DeFi pioneer MakerDAO funds regulated US bank

The $100 million line of credit from Dai holders to a Pennsylvania community bank to support commercial loans should have been a breakthrough, but further deals are on hold as the crypto purists fight back against the pragmatists seeking more exposure to real-world assets rather than digital ones.

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Photo: iStock

In August, MakerDAO, the organization behind the decentralized Dai stablecoin, provided $100 million of credit to Huntingdon Valley Bank (HVB), a Pennsylvania-based community bank, which it will use to provide new loans to local businesses in the Philadelphia area.

This is a remarkable moment.

One of the leading decentralized autonomous organizations in the cryptocurrency world is now funding a publicly quoted and regulated US bank, which is not allowed to hold cryptocurrencies on its own balance sheet, and in return deriving yield and collateral protection from conventional loans – mortgages, commercial credits to small and medium-size businesses – all held in a master trust.

Crypto is doing something useful for once.

This is a move that mainstream institutions now seeking exposure to crypto assets should take careful note of. Some of the crypto natives want to go the other way and take exposure to conventional assets for their yield and security.

But a backlash from the crypto purists now threatens to overwhelm this breakthrough.

Mainstream adoption

Surprisingly, even after the crypto crash that followed the de-pegging of Terra’s UST stablecoin in May and the collapse of crypto lenders such as Celsius, conventional investment banks and asset managers are still looking to profit from mainstream institutional investors’ adoption of cryptocurrency.

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