MakerDAO's Embrace of Centralized Stablecoins Offers Risks and Rewards

MakerDAO's ingestion of centralized stablecoins is part of its strategy for bringing Dai back in line with its $1 target.

By loosening its collateral requirements, MakerDAO encouraged a massive influx of centralized stablecoin collateral into the system and an efflux of new Dai.It worked.

It could translate into pressure for MakerDAO to conform to centralized finance's rule book.

If MakerDAO ingests even more of FinCEN-registered USDC's stablecoins, will nervous USDC execs start pushing MakerDAO to register with FinCEN?

Or maybe regulators will use centralized stablecoins as a Trojan horse for exerting control over MakerDAO. For instance, they could tell MakerDAO to apply for a banking charter on pain of USDC being ordered to drop MakerDAO as a customer, or to conform to consumer lending laws.

In a different scenario, ingested stablecoins might provide litigious investors with traction for launching lawsuits against MakerDAO. Or say that some USDC stablecoins are stolen and deposited in MakerDAO smart contracts.

The problems posed by the ingestion of centralized stablecoins are a prelude to the larger challenges MakerDAO will face as it incorporates "Real world assets," or RWAs, as Dai collateral.

Some MakerDAO purists dislike this shift towards the centralized end of the spectrum.

If the system could be modified to allow for negative rates, then the next time Dai wanders up to $1.05, MakerDAO wouldn't need to slurp up centralized stablecoins.

On the other hand, perhaps getting more engaged with the real world, first via stablecoins and next through Real World Assets, is what MakerDAO needs if it is to change the world for the better.