MakerDAO, a smart contract protocol based on the Ethereum networkannounced on Tuesday that it was lending DAI 100 million to US-based commercial bank, Huntingdon Valley Bank.
Today is a watershed moment to consider the potential for connecting decentralized finance and real-world finance.
Huntingdon Valley Bank and Maker are pioneering the first commercial loan participation between a US regulated financial institution and a decentralized digital currency. pic.twitter.com/wajJYVJwwz
— Maker (@MakerDAO) August 23, 2022
The latest agreement aims to support the growth of “Huntingdon Valley Bank’s existing and new businesses”.
MakerDAO collaboration with Huntingdon Valley Bank
In March, MakerDAO declared that it received a request for collateral integration from the Huntingdon Valley (HV) Bank, where the application is designed to increase demand for the project’s DAI stablecoin.
The application contained a request for $100 million from MakerDAO. He also described a legal structure in which the bank enters into a master purchase agreement with a trust that will act as MakerDAO’s representative, where both entities equally earn interest on loans disbursed to the bank.
With the deal approved by the stablecoin issuer, it made the loan to HV Bank, where the bank pledged its risk-weighted asset (RWA) loans as collateral, instead of the cryptocurrencies. used natively. MakerDAO has established a trust, RWA Master Participation Trust, to oversee matters regarding the HV Bank deal.
Under the agreement, the Trust receives up to 50% of the interest paid on RWA loans repaid by the bank’s retail and institutional clients.
MakerDAO noted in the Twitter thread that Ankura Trust will serve as the Calculation Agent ensuring that “participations in the proposed loans are eligible for funding under the eligibility criteria established by MakerDAO.”
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Another institution that has embraced the integration of blockchain services is the Swiss digital bank Sygnum. Since starting to offer these services in 2019, Sygnum has additional support for Ripple’s XRP token. In a recent report, it was revealed that the institution added Cardano’s ADA to its bank-grade staking service.