The asset composition seems ok and luckily the protocol is reducing shitty / unclear loan exposures.
From a financial perspective, the only point not 100% clear to me is the asset-liability maturity mismatch. Most of the assets have 1 year maturity, which seems actually totally fine. But maybe a couple of simulation of stress scenarios may cast more light on it.
Nonetheless, I keep wondering if we are missing to go into enough details on the real risks of all of this (obvs this is just my opinion), which are: 1) AML-related ones and 2) opacity of the legal structures put in place.
As regards 1), DAI is using hundreds of millions of dollars to buy Treasuries and bonds. It is basically enabling a huge amount of non-KYCed money to be invested into TradFi. Super cool opportunity if you have money stuck into the crypto World for various reasons, but super risky spot for the protocol. If part of those structures are freezed, the maturity of the investment moves from 0-1 year to years. God only knows how much the SEC would love to do little, but cause a bank run and kill us.
As regards 2), it is pretty tough to understand fully so many entities in so many jurisdictions. Again, one has issue, a bank run does the rest.
Still I think we have to find a way to connect RWA returns and DeFi ones, so I am 100% for all of this, just wonder if we have to imagine some more robust legal / compliance / financial "audit" or even better, if we can kinda imagine new solution to the topic
First congrats for the very interesting report!
The asset composition seems ok and luckily the protocol is reducing shitty / unclear loan exposures.
From a financial perspective, the only point not 100% clear to me is the asset-liability maturity mismatch. Most of the assets have 1 year maturity, which seems actually totally fine. But maybe a couple of simulation of stress scenarios may cast more light on it.
Nonetheless, I keep wondering if we are missing to go into enough details on the real risks of all of this (obvs this is just my opinion), which are: 1) AML-related ones and 2) opacity of the legal structures put in place.
As regards 1), DAI is using hundreds of millions of dollars to buy Treasuries and bonds. It is basically enabling a huge amount of non-KYCed money to be invested into TradFi. Super cool opportunity if you have money stuck into the crypto World for various reasons, but super risky spot for the protocol. If part of those structures are freezed, the maturity of the investment moves from 0-1 year to years. God only knows how much the SEC would love to do little, but cause a bank run and kill us.
As regards 2), it is pretty tough to understand fully so many entities in so many jurisdictions. Again, one has issue, a bank run does the rest.
Still I think we have to find a way to connect RWA returns and DeFi ones, so I am 100% for all of this, just wonder if we have to imagine some more robust legal / compliance / financial "audit" or even better, if we can kinda imagine new solution to the topic
Outstanding report, I have had such trouble seeing the full picture of the RWA exposure and this report is exactly what I needed. What a banger!
great report