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S&P Rates USDM Stablecoin Adequate

S&P Rates USDM Stablecoin Adequate

Level 3 stability score for USDM indicates that it is ‘sufficient.’
U.S. Treasury securities fully back the USDM of Mountain Protocol.
USDM uses a special rebasing process to provide daily yield.

S&P Global Ratings has rated the Mountain Protocol’s USDM stablecoin as “adequate” for stability and its capacity to maintain its peg to the U.S. dollar in their latest report. This evaluation is a component of the company’s ninth Stablecoin Stability Assessment, which aims to offer reliability and tolerance for various stablecoins in the market.

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Overview of Assessment Criteria and Ratings

S&P Global Ratings assesses stablecoin stability using a variety of factors. These risks include credit, markets, custody, reserve fund resilience, liquidation procedures, excessive collateralization, governance, regulatory compliance, and reliance on third parties. On a scale of 1 to 5, 1 represents a stablecoin’s capacity to retain its peg at a “very strong” level, while 5 represents a “weak” performance.

In this evaluation, USDM demonstrates consistent performance with an “adequate” grade at level 3, albeit of lesser quality compared to other stablecoins. USDC received a “strong” grade at level 2, while Tether and DAI both got a “constrained” grade at level 4.

Features of USDM and the Mountain Protocol

Early in September 2023, USDM was made available. It is the product of Mountain Protocol, a business with the appropriate Bermuda Monetary Authority license. Similar to stETH on Lido Finance, a USDM stablecoin represents an ERC-20 token fully backed by U.S. assets. Treasury securities and enables holders to obtain a daily dividend through a rebase process.

This special type of yield-bearing stablecoin aims to guarantee compatibility among various decentralized finance (DeFi) protocols while granting players based outside of the United States access to U.S. Treasury yields. Although functional and user-friendly, USDM is not registered as a U.S. security and remains unavailable to users in the United States.

Market Reaction and Prospects

The “adequate” rating indicates the market’s positive reaction to both USDM and Mountain Protocol, emphasizing its crucial role for both. Concurrently, Chuck Mounts, Chief DeFi Officer at S&P Global Ratings, expressed gratitude to the market for its reaction to their stablecoin stability assessments and the inclusion of USDM in their coverage. Owing to the DeFi environment’s evolution, these evaluations improve transparency and offer crucial information to users and investors.

Thus, the USDM rollout by the Mountain Protocol aligns with the growing demand for reliable, revenue-generating digital assets. In the stablecoin industry, the protocol’s endeavor, supported by reputable names and a cunning use of U.S. Treasury bonds as security, is revolutionary. The use and integration of cryptocurrencies in regular financial operations will depend on the stability and performance of stablecoins like USDM as the DeFi industry matures.

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