Progress Update on the legal structure for Maker vaults

The first real world asset went live on Maker almost a year ago. The first DAI backed by RWA was minted by New Silver in April 2021. Since then we have been continuously improving the technology and the legal structure. We are working with the Maker RWF Core Unit on structures both for US based issuers like the ones live today as well as an off-shore structure based in Jersey. In this post we want to share progress on the legal structure for US-based assets. The Jersey structure is a collaboration with RWF Core Unit and Nebula Capital.

In this update we explain the basic principles of how we expect that this structure will work in the future. This structure will provide formalization for our pool transactions. This upgrade is intended to better protect the interest of investors and the MakerDAO. The highlights are:

  • We are proposing that issuers will appoint a third party trustee to act on behalf of the DAO and other investors. The trustee will be able to protect the interests of the DAO and ensure independent control of the assets. It would also handle distributions in case of default leaving it no longer in control of the issuer or a liquidator. We are in initial discussions with some trustees.

  • The second proposed change is the introduction of a lock-box. A lock-box is a term of art meaning a segregated collection account for assets held outside the control of the issuer and the SPV. This structure means that the SPV assets are no longer in control of the issuer but in control of the trustee. It will be the role of the trustee to receive and handle payments to and from the lock-box and make sure the right parties (for example Maker) receive the payments. This means the issuer doesn’t control the funds from the borrowers to the tokenholders, reducing the risk of loss of funds or misuse of funds by the issuer.

This setup is intended to better protect investors and issuers from potential litigation claims and provides a consistent and coherent story for discussions with regulators and third party service providers such as custodians and banks.

This type of structure is well established in the industry and accepted by many TradFi players. Using this structure should make it easier to bring TradFi players into DeFi which will expand the types and quantity of real world assets available, which we think is a key step to reducing the volatility of DAI.

The schematic shared below (thanks to the Maker RWF Core Unit) is a work in progress with the RWF Core Unit with support provided by Shearman & Sterling as engaged by the RWF CU as counsel, along with Manatt as Centrifuge’s counsel.

Some of the different pieces in the diagram to highlight are:

  • The lock-box arrangement ringfences the payments so these are not subject to the possible insolvency of the SPV.
  • The use of a trustee better protects the interests of the investors and provides recourse in case of default.
  • The pledges in favor of the trustee remove bankruptcy risk with respect to the underlying assets.

We remain committed to coming up with a robust legal structure to ensure that the tokenholders’ interests are protected while growing the presence of diversified RWA as collateral.


Thanks for the update and great so see progress being made on this. It all makes sense from a risk management perspective.

Have you considered what the implications of this structure might be for cash drag in the pools? Will it take longer for Issuers to move around and distribute capital under this structure? Ie will this structure mean that it takes longer for the Issuers to access capital from the point at which it’s been deployed by Lenders, and/or longer to return capital when a Lender wants to redeem their capital?

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It is difficult to determine this in the abstract. Every issuer is different and the underlying assets perform and operate differently, but this is the typical structure used in TradFi markets and these operate relatively efficiently in terms of cash flow. The trustees are used to handling this sort of issue so we would just need to find an efficient conduit for the fiat ramps. That should be possible.

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