Applicant information
Name
Mountain Protocol Limited
Key Information
Address (Headquarters): Rosebank Centre, 5th floor, 11, Bermudiana Road,
City, State, Postal Code: Pembroke, Hamilton, HM08.
Country: Bermuda
Website: https://mountainprotocol.com/
License: #202302512 (Class F license, BMA)
Expected APY
5% APY
Underlying asset(s)
The following short-term maturity assets are the only accepted assets that can comprise the USDM Reserves:
(i) US Short Term bonds (Treasury Bills);
(ii) Near maturity longer-term bonds;
(iii) FDIC-insured bank deposits;
(iv) Repurchase agreements; and/or
(v) Money Market Funds or other Funds that invest in short term US federal bonds.
(vi) Assets in transit: Fiat and supported stablecoins (e.g. USDC) can comprise a nominal portion of reserves until they are invested.
Full investment mandate and attestations can be found in our documentation.
Minimum/Maximum transaction size
Minimum: US$ 100k
Maximum: No maximum.
Current AUM for asset
USD 44,711,799 (as of July 24, 2024)
Volume metrics
24h volume on secondary markets: USD 1.4M (as of July 24, 2024).
Over $2B of USDM transfers have been settled on-chain since launch.
Proposal Summary
What is Mountain Protocol
Mountain Protocol is a licensed Bermuda-based digital asset business, dedicated to developing and managing USDM (USD Mountain), a fully collateralized and permissionless, yield-bearing stablecoin.
USDM is an ERC-20 token backed 1:1 by short-term US Treasury Bills, a tried and true way of ensuring solvency and liquidity. Mountain Protocol is licensed by the Bermuda Monetary Authority (BMA), providing the oversight of a prudential regulator.
Mountain Protocol was recently upgraded to a Full License by the BMA, the highest licensing level for Digital Asset Businesses (link)
The company is backed by Castle Island Ventures, Multicoin Capital, Coinbase Ventures, Bankless Ventures, Department of XYZ, NewForm Capital and other leading investors in the space.
Why Ethena Should Use USDM
Integrating USDM as collateral in Ethena’s asset basket offers several key advantages:
1) Liquidity
USDM provides 24/7 liquidity, which is critical for maintaining efficient and stable financial operations. Primary customers can mint and redeem USDM at a 1:1 price, directly on the Mountain Protocol Platform, from both USD and USDC (USDT redemptions are on the works).
For redemptions, Mountain Protocol has access to several just-in-time liquidity facilities. The first line of defense is the BUIDL USDC redemption facility.
As a second line of defense, Mountain Protocol works with several Market Makers (e.g., Wintermute - source), who accept USDM 1:1 against other stablecoins, facilitating a repo-style transaction that allows for large redemption throughput despite TBills trading exclusively during business days.
2) Fees
Mountain Protocol charges no fees for either minting and redeeming, nor for holding USDM. This is particularly advantageous for Ethena as it allows for frictionless rebalancing capabilities, reducing the cost burden associated with frequent transactions and enabling more agile financial management.
For transparency, the company makes money by having a NIM (Net Interest Margin) between what the USDM Reserves make in the form of interest income from US Treasuries and the Rewards expenses paid to users on a daily basis.
3) Yield
USDM embeds a straightforward and transparent reward accrual mechanism, making accounting and transparency of reserves simple and seamlessly plugging into Ethena’s dashboards.
Yield is accrued on a daily basis and is directly credited to the holder’s wallet through a rebasing mechanism (similar to stETH). This means that the number of USDM in the wallet increases daily, reflecting the accrued yield, while maintaining a stable value of $1 per token.
This system eliminates the need for complex accounting procedures, monthly disbursements, reconciliation and other complexities, simplifying the yield accrual process for users and ensuring they benefit from consistent and predictable returns on their holdings.
4) Optionality to deploy in DeFi
Unlike permissioned tokens, USDM holders have various options to repurpose their tokens for additional yields in the future. USDM can be deployed in liquidity pools (e.g., Curve, Uniswap) or lending markets (e.g., Morpho, AAVE) to achieve higher returns, if the ENA holders vote to do so.
Basics and background
1. How will this allocation improve the diversification or capital efficiency of Ethena’s Reserve Fund and/or backing assets?
This allocation will enhance the diversification and capital efficiency of Ethena’s Reserve Fund, leveraging USDM’s stability, liquidity, competitive fee structure, and straightforward yield accrual process.
By incorporating USDM, Ethena can provide its stakeholders with a robust, reliable, and yield-bearing asset, aligning with its mission to maintain a diversified and efficient asset base.
2. Please describe any experience your firm has in working with decentralized organizational structures
Mountain Protocol has extensive experience working with decentralized organizations.
From a treasury perspective, several DAOs hold USDM in their treasury, including Arbitrum DAO (link) and another 3 of the top 20 DAOs according to DeepDAO.
From an integration perspective, the Mountain team has supported the integration and incentive allocation process for USDM on multiple protocols.
3. What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
Current AUM: USD 44,717,799 (as of July 24, 2024). As USDM is a USD-denominated token pegged to $1, TVL is the same as the AUM.
Legal design
1. Do holders of your product have any shareholder, investor, creditor or similar rights?
USDM holders have the right to redeem USDM at a fixed $1 from Mountain Protocol Limited, the issuer of the token and, in case of bankruptcy of Mountain Protocol, have claim to the assets held in the USDM Reserves SPV (USDM Reserves Ltd), managed by a joint Provisional Liquidator, appointed by the BMA. These rights are governed by Bermuda’s Digital Asset Business Act (DABA) and Bermuda Law.
DABA’s regulation recognizes customer assets as separate from the issuers and mandates that the company makes arrangements to ensure the return of client assets in the event the DAB is placed into liquidation (Source)
All DABA entities are required to be Bankruptcy remote unless customers explicitly choose to re-hypothecate, which requires licenses that Mountain Protocol does not hold.
2. Describe the legal and contractual structuring for your product, specifically naming any regulatory bodies overseeing the product, if applicable.
Mountain Protocol Ltd is 100% owned by Mountain Holdings Ltd.
Board Of Directors: Martin Carrica, Matias Caricato, Nic Carter, Jeffrey Baron, and Firas Habach.
Mountain Holdings Ltd. is owned by the Founders and Investors.
The Board of Directors is composed of Martin Carrica and Matias Caricato.
USDM Reserves Limited is an SPV, held by a BMA regulated Trust Business: Carey Olsen Fiduciaries Bermuda Limited.
Mountain Protocol is licensed and regulated by the Bermuda Monetary Authority (BMA), the unified financial regulator in the country, under the Digital Asset Business Act (DABA).
License #: 202302512 - link to official BMA site
3. How would the proposed allocation be treated in a bankruptcy or insolvency situation?
All assets issued in Bermuda are required to be Bankruptcy remote in order for a license to be issued, under DABA. DABA’s regulation recognizes customer assets as separate from the issuers and mandates that the company makes arrangements to ensure the return of client assets in the event the DAB is placed into liquidation (Source: https://www.bma.bm/viewPDF/documents/2018-12-29-05-19-21-Digital-Asset-Custody-Code-of-Practice.pdf).
This means that Ethena’s USDM holdings would be bankruptcy remote, along with all other USDM holders’ claims.
All custody of securities is done under USDM Reserves Ltd, with no re-hypothecation, which protects the USDM Reserves in case of custodian insolvency.
All institutions that Mountain Protocol works with require a risk assessment and subsequent no-objection by the regulator, to ensure safe handling of assets. Bankruptcy of brokers/custodians fall under the standard re-allocation process and don’t fall under the bankruptcy estate of the broker/custodian as assets are customer assets held off balance-sheet.
USDM Reserves hold nominal bank deposits, stablecoins and off-ramper claims.
Smart Contract/Architecture
1. How many smart contract audits have been completed with respect to your tokenized product? Please name the auditors and provide a copy of reports.
OpenZeppelin has conducted two smart contract audits for USDM and wUSDM. Full audits can be found here GitHub - mountainprotocol/audits: Mountain Protocol Code Audit Reports
2. Is the asset/product permissioned? If so, how are you managing user identities? Any blacklisting/whitelisting features?
No, USDM is a permissionless token.
3. Is the asset/product present on several chains? Are there any cross chain interactions?
USDM is natively present on Ethereum Mainnet, Polygon PoS, Arbitrum, Base, and Optimism. Mountain Protocol was also approved for launch on an additional 6 EVM chains and will deploy on those progressively.
Primary Customers have the possibility to move assets from one supported chain to another at no cost via the Mountain Protocol Platform. Mountain Protocol is also developing a native bridging solution so the secondary market users can also bridge their assets natively.
4. Are the applicable tokens being used in any other protocols? Please describe the various components of the ecosystem.
As a permissionless token, USDM can be integrated into any protocol for different uses. The most relevant ones are: AMMs, Lending Markets, and Perpetual DEXes. As being yield-bearing assets, USDM and wUSDM can be integrated to facilitate users a higher yield while supplying their assets, making markets more capital-efficient. Some protocols that have already integrated USDM or wUSDM are: Curve, Uniswap v3, Ramses Exchange, Poolside, Dolomite, Morpho Blue, HMX, IPOR, Revest, JOJO, Reserve.
5. How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
As any centralized issuer, Mountain Protocol and affiliated entities have access to core functions. Access controls can be found here: https://docs.mountainprotocol.com/reference/usdm-token#access-control-roles
Admins are distributed geographically and include both team members as well as third parties, to protect users from collusion. For Security Operations purposes, the admins are not disclosed.
6. Is there any custom logic required for your token/product? If so please give any details.
No custom logic is required. USDM is an ERC20 that follows the rebasing mechanism popularized by Lido’s stETH. USDM can also be wrapped into wUSDM to remove rebasing and have a value appreciating token. This can be done permissionlessly and with no slippage using the ERC4626 wUSDM vault. USDM can be custodied using the most popular solutions, including Fireblocks, SAFE, Metamask. Institutional custodians like Zodia already accept USDM.
