Introducing Mountain Protocol and USDM

The first regulated permissionless yield-bearing stablecoin

Mountain Protocol
4 min readAug 22, 2023

Stablecoins represent a foundational cornerstone within the realm of decentralized finance, facilitating instantaneous value storage and settlement. With an impressive aggregate of over $100 billion circulating in stablecoins, it’s unequivocally evident that stablecoins have emerged as a pivotal use case within crypto.

The problem with today’s stablecoins

There are several barriers holding stablecoins from the next wave of adoption, namely:

  • Regulatory clarity: What happens if stablecoin issuers go bankrupt? What legal framework guides what I should expect from this product?
  • Opportunity cost: A pertinent question arises — why park funds in stablecoins offering a 0% yield with multiple alternatives offering the ‘risk-free rate’?

These factors have been the main drivers in the $50B+ reduction in market cap of stablecoins in the last quarters.

The evolution of stablecoins

The evolution of stablecoins

Fiat-backed stablecoins have evolved with market demands.

Gen 1 — USDT

The key innovation was a digital asset, compatible with other digital assets, with a constant value of $1 (technically, with a redeemable value of $1, minus fees). This allowed traders and users in general to create virtual dollars.

Gen 2 — USDC

Addressing the question of trust around the collateral of stablecoins, by providing transparency on reserves, is now considered standard for stablecoins. Other players in this category include Paxos (USDP, BUSD, PYUSD), Gemini (GUSD) and others.

Gen 3 — USDM

Today, we are introducing a new kind of stablecoin: USDM, the first regulated permissionless yield-bearing stablecoin.

Building on the learnings from Generation 1 and 2 stablecoins, USDM is backed by short-term US treasuries, provides transparency on collateral and provides other features users have learnt to expect from stablecoins.

What sets USDM apart are 2 major features, enabled by leveraging the forward looking regulatory framework provided by the Bermuda Digital Asset Business Act 2018 and being a licensed and regulated entity (see license #202302512):

  • Clear regulatory framework
  • Rebasing yield-bearing stablecoin

Key features of USDM

USDM will be familiar to users of stablecoins, with some key differentiating features. We will cover these features in depth in future publications.

  • Sound collateral: Fully backed by short-term US Treasuries, held under custody with JPMorgan, managed by an independent registered Investment Manager.
  • Transparent: USDM Reserves are published monthly by an independent accounting firm, providing granular securities codes, amounts and values.
  • Permissionless: USDM is an ERC20 token, fully compatible with the DeFi stack and freely transferable to both EOAs and smart-contracts.
  • Stable value: Redeemable at a fixed $1 value to any primary user, providing tight pegs enjoyed by fiat-backed stablecoins.
  • Rebasing/ Yield-bearing: Mountain Protocol rewards holders on a daily basis, via RewardsMultiplier. This means that, on a daily basis, holders get more tokens, which can always be redeemed at $1.
  • Regulatory clarity: Mountain Protocol is a licensed and regulated digital asset issuer by the BMA. This provides holders with clarity on the claim provided by USDM (right to redeem at $1) as well as clarity on bankruptcy remoteness.

Uses of USDM

For users currently holding stablecoins, USDM allows them to benefit from the ‘risk-free rate’ with no additional trust assumptions. This will have massive implications in the crypto economy (and the general economy), some of which we can predict and many that other will discovered.

Here are some of the uses that early clients have arrived to:

  • Idle cash: Improve returns and reduce risk for large holders of stablecoins, including Exchanges, startups, whales and others.
  • Improved LP returns: USD-denominated Liquidity Pools, whether it is an AMM, an insurance protocol, a reserve or any other, reward capital providers with fees. By swapping to USDM, returns improve for LPs, attracting more capital.
  • Reduce cash drag: Allocating short term un-allocated stables into USDM to improve returns for hedge-funds or trading desks.
  • Build on this new primitive: With an ultra-low risk, yield bearing USD asset, builders can now offer new products to users. From SME USD accounts in emerging countries to collateral to create new branded stablecoins.

We are excited to see what builders build!

In line with regulatory requirements, this website, the USDM token and the Mountain Protocol Portal and all other services offered by The Company are not accessible by individuals or businesses from the US, Cuba, Iran, North Korea, Russia, Syria, the following regions in Ukraine (Crimea, Donetsk and Luhansk), Balkans, Belarus, Burma (Myanmar), Central African Republic, Democratic Rep of Congo, Ethiopia, Hong Kong, Iraq, Lebanon, Libya, Sudan, Venezuela, Yemen and Zimbabwe.

USDM has not been and will not be registered under the U.S. Securities Act of 1933 or with any securities regulatory authority of any State or other jurisdiction of the United States and (i) may not be offered, sold or delivered within the United States to, or for the account or benefit of U.S. Persons, and (ii) may be offered, sold or otherwise delivered at any time only to transferees that are Non-United States Persons (as defined by the U.S. Commodities Futures Trading Commission).

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Mountain Protocol

USDM is the first regulated permissionless yield-bearing stablecoin, backed by US Treasuries. Regulated by the Bermuda Monetary Authority (#202302512).