Growth CU weekly update: June 18 - June 24

General Updates

Growth and Risk CUs talked with Circle.

Circle offers a Yield Account with fixed terms, using Genesis as a lending partner. The added value of Circle is to provide an overcollateralized loan with Bitcoin. To access Circle’s yield account, the lender (MakerDAO) must be an incorporated entity to pass through KYC and sign the Line of Credit Agreement.

Some questions raised after our conversation with Circle:

  • If we lend them 1B USDC, does that change the yield? → No, scaling won’t change the terms. The Genesis market is massive.
  • Do we want to incorporate a company to lend USDC?
  • If so, what should be the next steps?

We also talked with Syndicate Protocol.

Syndicate is helping companies (VCs) to create DAOs to manage their investments through a DAO. During this process, they developed a framework to create legally compliant DAOs for sharing equity.

Now they want to work with DAOs to help them to be more compliant and allow them to interact with the off-chain world:

  • They can help DAOs to set up entities with on-chain ownership. These entities can have access to different service from the TradFi world (like a bank account)
  • They work with DAOs to help them to diversify their treasury, opening brokerage accounts to invest their crypto funds in instruments that protect them from inflation, like bonds.

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When that happens, will we have to report profits on the assets being completely legal or how would it be in that matter of fiscalization of profits being an incorporated company?


Tbh, that will really depends on how and where such entity is incorporated. I am personally leaning toward DeFi model (putting USDC into “proven” yield farm).


Just to clarify. What was the feedback from the @Risk-Core-Unit who took part in this call? Obviously any time you lock up fund it creates a risk of a bank run. Has there been any research done on what strategy is best to approach this risk?

Wasn’t on the call, but the simplest mitigation is to ladder everything so there’s cash being returned every day. So if you do 3 month maturity, divide the cash into ~90 buckets. Each day you invest 1/90th of the cash so that every day you get cash returned to you that you can either roll into another 3 months or withdraw.

You could also ladder by the week or any other interval if daily rollovers became onerous

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Understood, however I was looking more for answers to the following questions.

  1. What percentage of our USDC holdings would they allow us to invest?

  2. Considering there is a higher rate based on the length of the term, what term are they advising we consider.

  3. Are there any concerns of risk due to rehypothecation and what impact will that have on questions 1 and 2?

What about asking Goldman Sachs and the new crypto desk launched by Citibank—I bet they offer higher yields on $1B. Also, don’t let Circle pull the wool over your eyes—high net worth individuals can always negotiate higher yields than the plebs — it’s a fact. I mean 4% is nice—but they should feel privileged that your core unit even consider them. Just keeping it real — you gotta have swagger :slight_smile:

Cc: @MarianoDP


Well said, I hope people grasp the significance of this proposal. This initiative alone has the potential to more then double the revenue of the DAO. It should be prioritized accordingly.


The challenge here is all the legal implications of setting up a company for investments (plus taxes obligations). Circle’s proposal is just an example of what we could get. Still, it’s important to understand the risks associated with that decision. And I agree with Doo, if we are going to invest in crypto, I prefer the DeFi model.


Do they need an entity just for KYC, or do they want a tax ID/EIN with the intention of sending a 1099 to that entity? And even if an entity is formed, as they going to ask for KYC info. for its owners?

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From the yield account page, bottom: "For investors in the United States, investments described in this communication are offered by Circle Bermuda to “accredited investors” only in accordance with Regulation D, Rule 506(c) of the Securities Action of 1933, as amended. " So if that applied to the yield account we couldn’t do a US based entity.

There likely isn’t much difference here based on preliminary research, although obviously more work would need to be done to confirm.

IRS - Unincorporated Business
California - Unincorporated Associations

It’s possible there could a different entity or exemption they use if needed. MakerDAO could potentially also setup an entity that qualifies as a Qualified Institutional Buyer, which would remove essentially all roadblocks. This would take some careful thinking though and designing with developers and lawyers to see if it can be correctly modeled through the smart contract system. Not sure if the community would be willing to explore it.

I agree, a defi solution would definitely be more on brand for the DAO.

Still it’s great you are scoping out all possibilities. Great work! :+1:

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Just a thought experiment, but could we establish a trust in a tax neutral jurisdiction with a very limited mandate only permitting said trust to “(i) invest some percentage of the PSM with Circle; (ii) receive dividends therefrom; and (iii) transfer those dividends to a smart contract under MKR voter control”? Basically, the trust would act as a medium through which the funds could pass to the DAO.

I imagine MKR voters would have to vote to allocate funds to the trust, among other things.


This could also likely be done as a single member LLC with pass through treatment in Dealware with an operating agreement that basically only authorizes this. Either way the issue will be who is actually the owner for the state’s tax purposes, which circles back to the same DAO isn’t a person problem.

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We have already established a precedence of core teams forming LLC’s to protect themselves from liability. Why would this be any different?

The Maker community would need to vet and elect the person/persons.

Considering even for RWA, there has been a lot of discussion and also controversy, if it’s an centralised entity that handles billions and doesn’t have onchain transparency… I can see it creating a lot of conflicts.

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You get much higher rates on DeFi protocols anyway. I don’t personally see a reason to risk much more to get lower rates. On the other hand, putting collateral or treasury into DeFi is pretty proven and ongoing. For example, YFI team does that as well as Alchemix that puts collateral into yield generating to pay off loan (they had a bug but idea overall is still sound)

I prefer this a thousand times, although that fixed 4% regardless of the amount sounds tempting, because bringing more USDC 1 billion into the market will affect interest rates.