MakerDAO and Sky

A borrower locks collateral in a Maker vault and mints DAI against it, up to a limit set by governance. If the collateral value falls below the required ratio, the vault is liquidated. The collateral started with ether and grew to include USDC and, through real-world asset vaults, bonds and loans. According to sky.money, the Peg Stability Module "converts USDS and USDC at 1:1 with zero slippage and zero protocol fees", which links USDS to the dollar through the USDC the protocol holds.

For a payment firm the result is a dollar token that can be swapped into USDC without a spread, with no issuer that redeems it for bank money. sky.money reports a combined USDS and DAI supply of more than 10 billion and collateral worth more than 16 billion dollars. The e-money tokens page explains the licensed alternative, and Curve Finance covers another crypto-backed dollar, crvUSD.

In 2022 MakerDAO approved a vault for SG-FORGE with a credit line of 30 million DAI. Société Générale pledged 40 million euros of OFH tokens, covered bond tokens on Ethereum backed by home loans rated AAA by Moody's. In January 2023 SG-FORGE drew 7 million DAI, converted it into dollars and lent it to its parent bank as a refinancing, Kitco reported. The Börsen-Zeitung (in German) headlined the approval as the first transaction from TradFi into DeFi. SG-FORGE later repaid the loan, and MakerDAO closed the line. Today SG-FORGE issues its own stablecoins, EURCV and USDCV; the SG-FORGE page covers them.

USDS holders can deposit into sUSDS and earn the Sky Savings Rate, which sky.money describes as "a variable protocol rate funded from aggregate Sky protocol surplus" that "can change over time". The surplus comes from the fees borrowers pay and the returns on the protocol's reserve assets. According to The Block, MakerDAO founder Rune Christensen said Sky Token Rewards and the savings rate are restricted in some countries, including the US and the UK.

Under MiCA, a token that tracks one official currency is an e-money token, and only a bank or e-money institution may offer it to the public in the EU. DAI and USDS have no such issuer, and recital 22 leaves services provided in a fully decentralized manner outside MiCA. For a bank or payment firm, USDS or DAI on the balance sheet is a crypto-asset exposure without a claim on a regulated issuer. The stablecoin regulation page covers the EU rules, and Ethena shows how BaFin handled a synthetic dollar.

Stablecoins and their backing were on the program of the Bybit EU x Circle Roadshow in Frankfurt, which Finance Loop supported, and of the Digital Euro Conference, which Finance Loop has partnered with. The Chronicle page describes the oracle network that started inside MakerDAO and still writes the prices behind Sky's loans.

MakerDAO is the governance organization behind the DAI stablecoin, renamed Sky in 2024. Its protocol lets borrowers mint DAI and USDS against collateral.

USDS is the stablecoin Sky launched in 2024. DAI holders can upgrade to USDS one for one, and both tokens remain in use. USDS gives access to the Sky Savings Rate and Sky Token Rewards.

Collateral locked in the protocol: crypto-assets such as ether, stablecoins such as USDC, and real-world assets such as bonds. sky.money reports collateral above the amount of USDS and DAI outstanding.

A bank can hold crypto-assets under its prudential rules, but USDS is not an e-money token from a licensed issuer. It counts as a crypto-asset exposure, and offering it to clients raises MiCA questions.