Why we invested in Mountain Protocol
Mountain Protocol today announced an $8M Series A funding round led by Multicoin Capital. We are thrilled to participate alongside them and other notable investors including Castle Island Ventures, Coinbase Ventures, and Bankless Ventures. Mountain Protocol offers the first prudentially-supervised stablecoin (USDM) that is yield-bearing, permissionless, and fully backed by U.S. Treasuries. Launched in September 2023, USDM has since reached approximately $50M in outstanding issuance.
The stablecoin market now exceeds $160B and constitutes over 0.75% of total M2 Money Supply according to data compiled by RWA.xyz. Having achieved clear product market fit we believe stablecoins are well on their way to becoming a core infrastructure for the payment systems of the future. We envision stablecoins becoming a default – and often invisible – component of nearly every payment flow, enabling a faster, cheaper, and more secure payments system that is truly global – a dramatic step forward from the balkanized payment systems of today. The vision that has long energized technologists and financial innovators of being able to send money to anyone in the world with extremely low friction and at extremely low cost is rapidly becoming a reality.
Our investment thesis for Mountain Protocol is straightforward. We believe they are positioned to dominate three areas of critical importance in the stablecoin issuance market:
Regulated: Mountain Protocol has been regulated and supervised by the Bermuda Monetary Authority (BMA) since July 2023, a globally respected regulator that has developed one of the most robust regulatory regimes for digital asset companies. Importantly, the BMA is a prudential regulator, meaning Mountain Protocol must adhere to strong financial obligations such as backing their stablecoins on a one-to-one basis and producing monthly reserve audits from an independent accounting firm. We believe the stablecoins that achieve widespread adoption and are built into the plumbing of the payment systems of the future will be those issued by regulated financial institutions such as Mountain Protocol.
Yield-Bearing: Mountain Protocol is also unique in that it shares the yield it generates from its reserves with stablecoin (USDM) users. As of writing, USDM holders are receiving 5.00% APY in locations where Mountain Protocol is accessible. Neither of the two dominant stablecoin issuers in the market today provide this. Nor do they have an incentive to do so given their dominant market status. Mountain Protocol is unique in that it is not only highly regulated but also yield bearing for users of the token.
Global Focus: We see some of the most meaningful real-world adoption of stablecoins in markets outside of the United States, particularly in countries with inflation, fears of inflation, or a history of inflation. Stablecoins are not only faster, cheaper, better, but also an equalizing force between people in different parts of the world, enabling those in less stable financial markets to benefit from the monetary stability those in other parts of the world experience and take for granted. This is an enormous business opportunity that Mountain Protocol is particularly prepared to execute on given the familiarity of the founders with other parts of the world, including their home country of Argentina.
Mountain Protocol and its stablecoin USDM bring a differentiated approach to the rapidly growing stablecoin market and we could not be more excited to support them on their journey.