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MakerDAO Scandal: English or American Governance?

One of the mantas of the crypto-libertarian movement is “code is law”. This work well for Bitcoin and with its non-repudiable transactions but most organisations needs people to make decisions.

Crypto is seeking to reinvent finance but in doing so many organisations are ignoring the lessons of the past. The MakerDAO organisation is a very interesting crypto project that seeks to create a stable coin Dai which is pegged to the United States Dollar. Dai is minted when borrowers deposit Ethereum as collateral into the MakerDAO smart contract and destroyed when the redeem it. The holders of Maker tokens keep Dai at 1 USD by varying the interest rate charged to borrowers.

CRYPTOSTAR.MONEY lists over 35 other businesses that will lend you cash for your crypto.

This is all great crypto – on chain and totally transparent. I have great respect for the Maker team and what they are trying to do

The Scandal

Brady Dale at CoinDesk has done a great bit of journalism and reports on in-fighting at the company behind Maker. It is alleged  that the CEO of MakerDAO Ecosystem Growth Foundation (MEGF) has attempted to fire five members of the board. This looks odd to an Englishman but is more understandable for an American

Governance Matters

Anglo-Saxon capital has two distinct governance practices and to save my readers the trouble of reading thousands of words of detailed analysis I will summarise them as follows;

In the UK the Chairman of the Board’s primary role is to fire the CEO when he goes mad and the Board of Directors is there to represent the interests of the shareholders and other stakeholders.

In the USA the CEO can be Chairman and the board of directors is there to admire his work.

The American system contributes to it being the most entrepreneurial country in the world. It has produced amazing entrepreneurs including, Gordon Moore,  Steve Jobs, Bill Gates and Elon Musk (SpaceX). It has also given excessive power to people like Kenneth Lay (Enron), Steve Ballmer  and Elon Musk (Tesla).

MakerDAO is in a tax haven

The MakerDAO farce gets worse.

MEGF is incorporated in the Cayman Islands which is often called a “tax haven”. Tax havens are great for fin-tech companies because they have flexible regulations that allow these new businesses to grow and prosper. However historically their core business has been hiding the beneficial ownership and effective control of companies. Investors in Maker should welcome the first and discourage the second.

Until the recent leak MEGF had hidden the names of its directors for “security reasons”.

What should be done?

MEGF has used its residence in the Cayman Island to obscure its governance. Maker Token holders should demand that it moves to London or New York and cleans up its act.

What Next?


This article is out of date please refer to our update on this issue.


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