It’s been a busy week for stablecoin news, with three startups announcing funding rounds: Mountain Protocol, M^0 and Tether-backed XREX. Additionally, Paxos announced a yield earning stablecoin in Dubai, and Franklin Templeton said it would allow investors to use USDC to buy its tokenized money market fund FOBXX. This last piece of news could mean more asset managers issue stablecoins.
Earlier in the week we reported that stablecoin issuer Tether invested $18.75 million in XREX for B2B cross border payments. XREX is closely tied to the Unitas Protocol a novel solution for emerging market currency stablecoins we covered separately.
Mountain Protocol
Stablecoin issuer Mountain Protocol announced an $8 million Series A funding from Castle Island Ventures, Coinbase Ventures, Bankless Ventures, Dept of XYX, Wormhole, Aptos and others.
The protocol launched last year, providing a yield bearing stablecoin, USDM. It’s regulated in Bermuda, and unlike some other yield bearing stablecoins, the income is straightforward. It plays out a fixed percentage that is close to the interest rate earned on the short term Treasuries held as stablecoin reserves. So far, the stablecoin balance is just shy of $50 million and is already available on several blockchains.
M^0 Foundation
Turning to the third funding round, M^0 Foundation announced its launch and a larger $35 million Series A, including backing from Siam Commercial Bank’s SCB 10X. Bain Capital Crypto led the round with other new investors, including Galaxy Digital, Wintermute, GSR and Caladan.
When the USDC stablecoin first launched, the plan was for multiple issuers. However, once it gained traction, that concept was quietly dropped. M^0 does something similar with a readymade blockchain protocol supporting multiple issuers (minters) across different jurisdictions using eligible custody solutions for the reserves. This could prove handy as several jurisdictions are implementing slightly different stablecoin laws. It has a concept of validators who verify that the minter has placed the appropriate amount of treasury bills with the custodian.
Notably, each of these initiatives has novel features.
Paxos launches a yield bearing stablecoin
Meanwhile, One of the ‘OG’ stablecoin issuers Paxos has a UAE affiliate Paxos International that issued a yield bearing stablecoin, Lift or USDL. The stablecoin is regulated as part of the Abu Dhabi Global Market (ADGM), and pays yield on a daily basis. It is only available on Ethereum.
Paxos is partnering with a number of distributors and has already signed up four in Argentina: Ripio, Buenbit, Manteca and Plus Crypto. Demand for dollars in Argentina is high, given that the peso has lost around 75% of its value during the past year. The new president has talked of dollarizing the economy, but Congress has blocked some of his other plans.
Franklin Templeton supports USDC for buying tokenized funds
In other news, asset manager Franklin Templeton announced that institutional investors can use USDC to buy shares in its tokenized money market fund FOBXX. In reality, it converts the stablecoin to conventional dollars.
As we covered in more detail elsewhere, one of the benefits of tokenized money market funds is the ability to buy and sell them 24/7. However, for an asset manager to support 24/7 off-ramps, they’d need always to hold a stablecoin balance to fund redemptions. Given stablecoins such as USDC don’t pay a yield, that’s an expensive service for asset managers to provide.
An alternative is for asset managers to have their own stablecoin – that way they earn the interest on the stablecoin reserves and can still offer a 24/7 off-ramp. WisdomTree recently landed a New York Trust charter to issue stablecoins. In Europe, Deutsche Bank’s asset management subsidiary DWS is planning an AllUnity stablecoin with partners.
For a single week, that’s a lot of stablecoin news, indicating momentum in the sector. Together with the recent positive legislative news such as the FIT 21 Act, it might encourage stablecoin issuer Circle to pull the trigger on its planned IPO.
