Mountain Protocol has bagged $8 million in a funding round led by Multicoin Capital.
The venture is part of a wave of stablecoin issuers — like Paxos and Angle — who are muscling in on big issuers’ turf by sharing the yield of US treasuries with customers.
“Today, Circle and Tether are keeping all of that,” Mountain co-founder Martin Carrica told DL News, referring to the 5% yield on US Treasuries. “Our thesis is, let’s give that back to the holder.”
The market is getting crowded. PayPal, Ripple, Aave, Curve, and Ethena are just some of the organisations to announce or launch stablecoins over the past year.
No wonder: Last year Bernstein predicted that the $161 billion market would balloon to almost $3 trillion by 2028.
Sharing yield
Amid high interest rates, stablecoins backed by US Treasuries have become a cash cow for issuers.
As of Wednesday, the yield on three-, six- and 12-month US Treasuries was just above 5%.
Mountain’s USDM and similar stablecoins are attempting to lure users by sharing the yield they earn on the US Treasuries.
Carrica likened USDM to a high-yield savings account.
However, breaking through the dominance of Tether and Circle — who have a combined market value approaching $150 billion and unmatched liquidity, a feature that appeals to high-volume traders — is a challenge.
After Coinbase Ventures and Castle Island backed Mountain’s $4 million September seed round, Mountain has struggled to maintain early momentum.
While Ethereum layer 2 blockchain Manta using USDM in a rewards campaign fuelled the stablecoin’s growth to a total value of $154 million in March, it’s since fallen to $49 million.
‘It sounds sketchy’
Bermuda-registered Mountain won’t offer its USDM to US users until the country passes stablecoin legislation — which is unlikely to happen in 2024 due to the election and political squabbling on Capitol Hill.
This has been an obstacle when negotiating partnerships or deals with vendors, Carrica said.
“They’re like, ‘okay, why are you not working in the US? It sounds sketchy,’” he said. “It’s less of a pure regulatory issue, and it’s more of a perception issue.”
Carrica said Mountain’s real opportunity is not in the US, but in cross-border payments and countries with unstable currencies, like his native Argentina.
The company will use the new cash injection to boost hiring and bring USDM to an additional 15 blockchains, including Solana and Cosmos.
As of Wednesday, USDM could be issued and redeemed on Ethereum, Polygon, and a trio of layer 2 blockchains: Arbitrum. Optimism, and Base.
Mountain also plans to make it easier to redeem USDM for other stablecoins on a one-to-one basis and for businesses to use USDM.
Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email him at aleks@dlnews.com.