# FIP 87 - Centrifuge \<\> FRAX AMO Proposal **URL:** \ **Category:** AMOs\ **Created:** [June 7, 2022, 11:43pm UTC](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519 "2022-06-07T23:43:15Z")\ **Posts on this page:** 4\ **Page:** 2
**Author:** ![thespacecatjr](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/thespacecatjr/32/830_2.png) [@thespacecatjr](https://gov.frax.finance/u/thespacecatjr)\ **Post date:** [June 14, 2022, 10:53am UTC](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519/21 "2022-06-14T10:53:21Z")
Thanks for the comments @Will. Here is some more colour: > [@Will](#): > > Centrifuge has undoubtedly done significant work to derisk this by allowing the junior tranche to mitigate risk, and work on the legal structure, but curious as to why MakerDAO has chosen not to rely on Centrifuge for the bulk of origination of their RWA activities? I think this is actually untrue. The only RWAs financed by Maker thus far have come through the Centrifuge platform and to a small extent 6S Capital. They rely on us for our infrastructure (both on and off chain) to tokenize RWA and make them accessible to DeFi. Origination can come from any party and be sent to Centrifuge for a safe and reliable securitization. > [@Will](#): > > In addition, also curious on the regulatory risk that this could bring to the protocol – what is the timeline for recovering funds in a default and what are the trust assumptions baked into this process here? I’m not worried about protection – I’m more worried about the legal framework and the time it takes to unwind and recover funds. The collections process varies from asset to asset. In the rare case a default happens, I would estimate it would take a few months to recover funds. The big positive to what we do is that there are actual assets backing our pools. Even in the event of a default it would very likely be the case that there is a decent recovery rate on the assets, this is much safer than un/under collateralized lending. There is a professional servicer assigned to the SPV (the off-chain structure that houses the collateral) that is tasked with managing a liquidation should it need to occur. > [@Will](#): > > I think my current sentiment is that going forward there should be some independent legal weigh-in to help assess these opportunities from a compliance standpoint, since this will be a growing concern going forward. Happy to have this done and collaborate here as things move forward. > [@Will](#): > > In addition, strongly agree with @sparkes25 that this should likely be scaled down. IMHO the Goldfinch AMO was likely too large given the size of the protocol (bigger than the protocol itself), but at least the collateral was somewhat liquid, which I can’t tell is the case here. Strongly urge for a 50m or less AMO, which can be sized up upon Frax building up a stronger buffer. Yeah, as I said above, and suggested by @sparkes25, $100M is definitely not the expectation from day 1. I think starting at something smaller is the right move and we can scale over time. I agree with @sparkes25 the FRAX team should have oversight here and can scale the AMO as they see fit. Also, I think the liquidity profile of Centrifuge and Goldfinch are very similar (we even have a borrower that is live on both platforms). We could specifically design a FRAX vault with short duration assets to start given FRAX maximum liquidity. ---
**Author:** ![Justin1066](https://avatars.discourse-cdn.com/v4/letter/j/34f0e0/32.png) [@Justin1066](https://gov.frax.finance/u/Justin1066)\ **Post date:** [June 14, 2022, 10:17pm UTC](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519/22 "2022-06-14T22:17:40Z")
I agree with @ctcunning here - reducing the overall ticket size probably has the counter-effect of attracting less institutional grade end borrowers (more start-up / SME folks). 100m doesn’t have to all be deployed at once, it could be conditional upon performance, but the best borrowers in the market will want to know they can at least _access_ 100m within the partnership. ---
**Author:** ![fraximalistdave](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/fraximalistdave/32/67_2.png) [@fraximalistdave](https://gov.frax.finance/u/fraximalistdave)\ **Post date:** [June 14, 2022, 10:22pm UTC](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519/23 "2022-06-14T22:22:03Z")
Proposal is live! [https://snapshot.org/#/frax.eth/proposal/0x0df59cf7cd0d4fd7491c6be594f954c19d4e21155329b4efa8071c50cfe7be34](https://snapshot.org/#/frax.eth/proposal/0x0df59cf7cd0d4fd7491c6be594f954c19d4e21155329b4efa8071c50cfe7be34) ---
**Author:** ![thespacecatjr](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/thespacecatjr/32/830_2.png) [@thespacecatjr](https://gov.frax.finance/u/thespacecatjr)\ **Post date:** [June 15, 2022, 1:49pm UTC](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519/24 "2022-06-15T13:49:27Z")
Thanks @fraximalistdave ! [Previous page](https://gov.frax.finance/t/fip-87-centrifuge-frax-amo-proposal/1519.md?page=1)