Crypto lending platform MakerDAO is voting on a new proposal to add another commercial bank to its ecosystem, strengthening the connection between decentralized finance (DeFi) and traditional finance.
According to the MakerDAO governance forum, Cogent Bank, a Florida-based commercial bank, is proposing to participate with $100 million in loans to MakerDAO’s RWA Master Participation Trust.
Maker Governance votes in 4 governance polls within the current monthly governance cycle.
What is being voted on and what are the implications?
Summary here. ↓ pic.twitter.com/YivsBJHpHv
— Creator (@MakerDAO) February 17, 2023
The proposal is part of MakerDAO’s monthly governance cycle and seeks the same terms and conditions applied to Pennsylvania-based Huntingdon Valley Bank (HVB), which entered into a collateral integration with the crypto firm in July 2022, giving it allows the bank to borrow against its assets using DeFi.
Under the same conditions, MakerDAO would use its trust arm to peg available capital in Cogent Bank to MakerDAO’s Dai (DAI) stablecoin. The trustee would be responsible for ensuring the minting and destruction of DAI from the vault, as well as managing the partnership with the bank.
The DeFi protocol would gain exposure to the credit market in at least eight categories, including commercial real estate, industrial, life insurance, consumer and public finance, with loans issued primarily at fixed rates.
Among MakerDAO’s sources of revenue are fees associated with maintaining the vault, DAI minting, and returns. The 30-day guaranteed average overnight funding reference rate remained to 4.15% as of January 5.
Before its acquisition in 2018, Cogent Bank was known as Pinnacle Bank. The Florida bank has $1.3 billion in assets under management and is insured by the Federal Deposit Insurance Corporation. According to the company, loans originated in the first three quarters of 2022 totaled $602 million and totaled $873 million in 2021.
In an attempt to weather the crypto winter of 2022, MakerDAO revealed a governance process for its first collaboration with a traditional bank, Huntingdon Valley Bank. At the time, the DeFi protocol announced plans to onboard other banks depending on the results of its integration with HVB.
