MakerDAO Partners With Coinbase to Become Largest Holder of USDC

On Oct. 24, Coinbase announced that MakerDAO governance had voted in favor of the proposal to custody $1.6 billion USDC with Coinbase Prime.

This means that Coinbase has expanded its USDC rewards program to an institutional client for the first time, it added. MakerDAO will hold the funds with Coinbase Prime, the firm’s institutional broker, while earning 1.5% on them.

The proposal was ratified with 75% of the votes, or 109,944 MKR tokens, on Oct. 24.

MakerDAO community approves our proposal to custody up to $1.6B in USDC with Coinbase Prime. Marks the first time we’ll offer USDC rewards to institutions. Excited for what this means for USDC, @MakerDAO, and the stablecoin ecosystem as a whole. https://t.co/jOrmEvYg80

— Coinbase Institutional (@CoinbaseInsto) October 24, 2022

Eroding DAI Decentralization?

Coinbase is confident that stablecoins will be an integral part of the future of finance. Its USD Coin has increased its market share at the expense of industry leader Tether (USDT) over the past couple of years.

MakerDAO has now become the largest holder of USDC. Jennifer Senhaji, growth and business development at MakerDAO, commented that the additional monthly revenue generated through this deal “enables Maker to further advance its overarching mission to create a global, trustless financial future built on decentralized rails.”

Coinbase Institutional Rewards (MIP81) has been approved by Maker Governance through a Ratification Poll.

🗳 https://t.co/7Hk6gqKTsO

This outcome enables Core Units to initiate the onboarding of 33% of the PSM’s USDC to @Coinbase‘s Institutional Rewards program.

🧵↓

1/ pic.twitter.com/aOMdGev1QG

— Maker (@MakerDAO) October 24, 2022

However, the move erodes some of the decentralized properties of Maker’s stablecoin DAI as it is now largely collateralized by a centralized stablecoin. USDC represents a third of the treasury backing the Peg Stability Module that allows users to deposit collateral to mint DAI.

It is part of phase one of Maker’s “Endgame Plan” to increase its collateral into real-world assets and short-term bonds. The long-term goal of the plan is to make DAI a free-floating asset that is not pegged to the dollar.

In the next three years, Maker will double down on real-world assets in order to accumulate Ethereum and increase the ratio of decentralized collateral.

COIN Stock Performance

Coinbase stock has been battered during the bear market of 2022, which has seen tech stocks and crypto markets highly correlated. COIN has traded flat on the day, reaching $66.39 during after-hours trading.

The stock has mirrored crypto markets, trading sideways for the past four months. COIN is down around 80% from its November 2021 all-time high.

The MakerDAO MKR token, meanwhile has lost 6% on the news in a fall from an intraday high of $975 to $916. It has recovered marginally during the Tuesday morning Asian trading session to change hands for $933 at the time of writing. MKR is down 85% from its May 2021 all-time high.