USDM Stablecoin Earns Adequate Rating in S&P Global Stability Report
In the recent release of the S&P Global Ratings report, the USDM stablecoin by the Mountain Protocol has received an “adequate” rating for its stability and ability to maintain its peg to the U.S. dollar. This assessment is part of the ninth Stablecoin Stability Assessment conducted by the firm, which aims to provide investors with reliable and dependable stablecoin options in the market.
The stability of stablecoins is determined based on various criteria by S&P Global Ratings. These include credit risk, market risk, custody risk, reserve fund resiliency, liquidation mechanisms, over-collateralization, governance, regulatory compliance, and third-party dependencies. Stablecoins are ranked on a scale of 1 to 5, with 1 representing a “very strong” ability to maintain their peg and 5 indicating weak performance.
In this rating, USDM has received an “adequate” grade at level 3, indicating a stable performance that is considered slightly lower in quality compared to stablecoins like USDC, which received a “strong” grade at level 2. Other stablecoins such as Tether and DAI received a “constrained” grade at level 4.
USDM was launched in early September 2023 and is offered by Mountain Protocol, a company licensed by the Bermuda Monetary Authority. It is an ERC-20 token fully collateralized by U.S. Treasuries and provides holders with a daily yield through a rebase mechanism, similar to stETH in Lido Finance.
This unique form of yield-bearing stablecoin allows non-U.S. participants to access U.S. Treasury yields while ensuring interoperability across various decentralized finance (DeFi) protocols. Although user-friendly and functional, USDM is not available to U.S. users and is not registered as a U.S. security.
The “adequate” rating is significant for USDM and Mountain Protocol, as it reflects positive investor response from the market. Chuck Mounts, Chief DeFi Officer at S&P Global Ratings, appreciates the market’s reception to their Stablecoin Stability Assessments and the inclusion of USDM in their coverage. These assessments contribute to transparency and provide vital data for investors and users in the growing DeFi sector.
The launch of USDM by the Mountain Protocol aligns with the increasing demand for stable, income-earning digital assets. With reputable backing and a secure use of U.S. Treasuries, the protocol is pioneering advancements in the stablecoin arena. As the DeFi sector continues to mature, the performance and stability of stablecoins like USDM will play a crucial role in the integration of cryptocurrencies into traditional financial operations.