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Highlights
- USDM rated 'adequate' with a level 3 stability score by S&P Global.
- Mountain Protocol's USDM is fully backed by U.S. Treasuries.
- USDM offers daily yield through a unique rebasing mechanism.
In the latest release from S&P Global Ratings, the Mountain Protocol’s USDM stablecoin has been granted an “adequate” rating regarding its stability and ability to maintain its peg to the U.S. dollar. This assessment is part of the firm’s ninth Stablecoin Stability Assessment, aimed at providing tolerance and dependability for different stablecoins within the market.
Assessment Criteria and Ratings Overview
S&P Global Ratings uses numerous criteria to determine the stability of stablecoins. Such risks are credit risk, market risk, custody risk, resiliency of reserve fund, liquidation mechanisms, over-collateralisation, governance, regulatory compliance, and third-party dependencies. Stablecoins are ranked on a scale of 1 to 5, 1 being the ability to maintain their peg at a “very strong” level and 5 being as “weak” performance.
In this rating, USDM has an “adequate” grade at level 3, which illustrates a stable performance that is, however, of lower quality when compared to other stablecoins like USDC that received a “strong” grade at level 2, Tether and DAI, both of which received a “constrained” grade at level 4.
Mountain Protocol and USDM Features
USDM was released in early September 2023 and is the offering of Mountain Protocol, a company that has been duly licensed by the Bermuda Monetary Authority. A USDM stablecoin is an ERC-20 token, which is fully collateralized by U.S. Treasuries, and allows holders to receive a daily yield using a rebase mechanism, just like the stETH in Lido Finance.
This unique form of yield-bearing stablecoins is intended to allow non-U.S. participants to access the U.S. Treasury yields while ensuring interoperability across different decentralized finance (DeFi) protocols. While being user-friendly and functional, USDM is not accessible to U.S. users and is not registered as a U.S. security.
Market Reception and Outlook
The “adequate” rating is a critical point for USDM and Mountain Protocol as it indicates the positive investor response that the market gives to both. Concurrently, the market’s response to their Stablecoin Stability Assessments and the addition of USDM to their coverage was appreciated by Chuck Mounts, Chief DeFi Officer at S&P Global Ratings. Due to the development of the DeFi environment, such assessments enhance transparency and provide essential data for investors and users.
The Mountain Protocol’s rollout of USDM, as a result, is in line with the increasing need for stable, income-earning digital assets. The protocol’s effort, backed by respected names and a smart use of U.S. Treasuries as security, is a groundbreaker in the stablecoin field. With the maturity of the DeFi sector, the performance and stability of stablecoins such as USDM will determine the usage and integration of cryptocurrencies in normal financial operations.
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