As of November 1, 2023, USDM is fully backed by US Treasury Bills (94%) with an average maturity of 60 days or less, and cash in transit (6%) in fully segregated accounts.
As mandated by the Bermuda Monetary Authority, USDM reserves are managed by EQ Capital, a professional investment manager based in Bermuda, in accordance with USDM’s Investment Mandate.
Apart from direct investments in US Treasury Bills, USDM may also be backed by US Treasury Notes with near maturity, Money Market Funds investing in short term US Treasuries, Treasury ETFs and Reverse Repo Agreements collateralized by US Treasuries. These have been chosen as US Treasuries are considered the safest USD-denominated assets.
For off-chain collateral, we rank storage methods as follows (highest to lowest)
With regulated custodians in reputable jurisdictions
With regulated custodians not in reputable jurisdictions (e.g, BVI, Bahamas)
Others / Undisclosed
USDM reserves are currently held at two US-regulated custodians. One is a global systemically-important bank and the other is a Nasdaq-listed Fortune 100 financial institution. Further, each custodian has been pre-vetted by the Bermuda Monetary Authority.
Identities of the custodians have been disclosed to Bluechip under a non-disclosure agreement.
USDM reserves are held in trust by a regulated custodian in segregated accounts on behalf of, and for the benefit of USDM holders. We believe that USDM reserves are bankruptcy-remote for the following reasons:
A ‘bankrupty-remoteness’ opinion from an international legal firm has been obtained. Bluechip has reviewed a copy of this.
Pursuant to Mountain Protocol’s Terms & Conditions, the issuer does not retain legal and beneficial title to USDM reserves and holds them in trust for USDM holders
Mountain Protocol holds USDM reserves in custodial accounts, the terms of which expressly state that those accounts are held ‘on behalf of’ or ‘for the benefit of’ USDM holders.
The Digital Asset Business Act 2018 of Bermuda and the Code of Practice issued thereunder grant legal recognition to the concept of ‘client assets’, and mandate that such assets be segregated from the licensed undertaking’s own funds and make arrangements to ensure the return of client assets in the event the undertaking is placed into liquidation, becomes insolvent or is a victim of theft.