Growth CU weekly update: July 9 - July 15

General Updates

Offboarding Collaterals.

We are reaching out to the issuers of the tokens we plan to offboard and conversing with them to get feedback and understand why they or their token holders are not using Maker Vaults. We have spoken with Brave, Loopring, Decentraland, Kyber and waiting to talk with 0x. The feedback we are getting is similar from all the teams:

  • They want to maintain their position as collateral
  • They (as a project) are not using Maker Vaults for different reasons (their treasury is for helping them to grow, so they use it in their partners and marketing, they are defining how to manage their treasury, their treasury team is not aware of the current risk parameters)
  • They are interested in having special terms for their vault

These conversations are taking longer than expected because the decision to open a Vault to take the remaining DC requires time. We explain to them that we will be waiting until September 1st to see if the utilization of the vault changed and that that will be taken into account when the community decides what the next steps are.

Institutional Vaults.

We are talking with a large custody platform and ​​a major digital asset trading platform about Maker Vaults. We have their interest, and if we can have them opening vaults, that will increase Dai supply and reduce our USDC exposure. What do we want to do to achieve this:

  • We need the institutional vault product asap. Growth, PE, Risk CUs, and Nexo are working together on the proposal of this product.
  • We need to solve the KYC part. We are working with our legal counsel to understand these companies’ requirements and determine what kind of structure we need to incorporate or with whom we need to partner to solve it.
  • Institutions have off-chain requirements: like the one-to-one relationship to set agreements and a larger liquidation window.

PSM delay Update.

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EPNS+Oasis

Oasis.app users will receive notifications that would help them to manage their Maker Vaults, including:

  • When the Vault might be at risk of liquidation on the next price update due to a sudden price drop
  • When the Vault has reached a certain collateralization ratio that you’d like to take a certain action at, either to buy additional collateral, or repay.
  • When risk parameters, such as Stability Fee’s or Debt Ceiling changes are made by Maker Governance that affect a Vault you own.

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Are these requirements generally regulatory in nature, or for their own internal risk management? Is there likely to be a solution that will work for most (or all) of these institutions? Or are their needs diverse?

In a set up where a platform (ie. custody provider, digital asset mgmt platform) wants to provide institutional vaults as a service within their offerings, where their clients can opt-into the vault via that platform provider, that platform provider needs to have an entity on our side to KYC in order to deploy their clients funds into a institutional vault.

They also want to have internal risk mgmt for their own due diligence to feel comfortable with our smart contract risk, liquidations and other risk parameters, to open it to their customers.

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Would Fireblocks + incorporating Maker Growth CU solve this? Hence, these players would deal directly with Growth CU and said CU would provide the KYC/AML requirements needed by the institutions. After all these vaults need to be exclusive and whitelisted via a smart contract, right?

I think the institutional asks here mirror what other projects going the “Pro” route (Aave, Compound) have experienced. Having worked with large financial institutions in the past, I’d say the KYC focus stems from regulatory (mostly bank secrecy act though also more general reasons) but is driven expressly by internal US domestic legal and, principally, compliance concerns re various risks, including reputational. Compliance more likely than not will be the most cumbersome hill to climb.

But, have you noticed that the big hacks, often use DAI as a currency of liquidation, and not only that, many users who love their privacy and anonymity use DAI. Don’t you think that making KYC is a kick to the principle of DAI being a currency for all?

You don’t need to do KYC to use Dai so I don’t think it will have an impact. Also, looking at how the market responds positively to AAVE and Compound’s move, I don’t think there will be backlash like you are mentioning.

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And tbh, whatever we do, haters gonna hate :sweat_smile:

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Rune gave a good interview somewhat on this topic recently (on the Defiant) where he basically said that keeping the Protocol open and permissionless was key to growth and further innovation in contrast to a centralized team creating whitelisting “pro” products exclusively. I agree with this approach as it permits both Dai to remain a permissionless user generated currency open to all while allowing different community members the option of creating their businesses thereon. For what it’s worth, there certainly is a commercial opportunity to create a VASP on top of the Protocol (Nexo has done that by borrowing and lending to its clients for a profit), which would require KYC for its clients.