Applicant information
- Name: M^0 Foundation
- Address (Headquarters): Bergliweg 15, 6300 Zug, Switzerland.
- Country: Switzerland
- Website: www.m0.org
- Primary Contact: Marlowe Johnson
- Title: Head of Onchain Integrations
- Country: United States of America
- Email: marlowe.johnson@m0.xyz
- Telegram: @marlowejohnson
Key Information
- Expected Yield: 4.15% (subject to governance)
- Expected Maturity: N/A
- Underlying asset:
- United States Treasury Bills with a remaining time to maturity of 180 days or less.
- Tokenized United States Treasury Bills such as money market fund units that comply with the above mentioned remaining time to maturity criteria - subject to specific definition of the financial product in scope.
- List of approved tokenized assets: Superstate Short Duration US Government Securities Fund (commonly referred to as USTB).
- Minimum/Maximum transaction size: N/A
- Current AUM for product: $152mm
- Current AUM for issuer: $158mm
- Volume of transactions LTM: $200mm
- Source of first-loss capital: 3% equity buffer on account of maximum 97% ratio of minted $M to collateral
Please note: References herein will be made to the token $M, while acquisition of the token would be in Wrapped M ($wM), a wrapper made to enable yield distribution and onchain connectivity. As this is a 1:1 wrapper, the distinction is omitted for the sake of simplicity.
Basics and background
1. How will this investment improve Arbitrum’s RWA ecosystem?
M^0 believes that $M is the closest onchain proxy to access the risk free rate, in a truly decentralized and permissionless way, giving maximum freedom to builders and institutions. Beyond the opportunity for stable returns from high quality underlying collateral, this investment would signal to the ecosystem that M^0 and Arbitrum DAO jointly consider Arbritum to be the leading ecosystem for RWA and tokenized asset builders. Arbitrum was the first Layer 2 deployment for M^0’s infrastructure and we remain committed to contributing to the continued growth and success of the ecosystem – with specific focus on Arbitrum as a long-term liquidity hub for future $M-powered extensions and integrations.
2. Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
Leadership Team - M^0 Labs/M^0 Foundation
Greg Di Prisco is a Co-Founder and the Chief Architect at M^0 Labs and a Council Member at the M^0 Foundation. M^0 is a federation of issuers operating on the decentralized M^0 Protocol where they mint the fungible cryptodollar, $M. Greg has had an extensive career in the crypto industry, with a speciality in DeFi. Prior to co-founding M^0, Greg was a Co-Founder and Protocol Architect at Ajna Labs, creators of the Ajna Protocol. He also spent over four years as the Head of Business Development of the Maker Foundation, the builders of MakerDAO. Additionally, Greg is a Co-Founder and Managing Partner at Distributed Capital Partners, one of the earliest crypto-exclusive venture firms, founded in 2017. Prior to working in the crypto industry, Greg was a commodity futures trader at Axiom Markets. He holds a BS in Economics from Villanova University.
Luca Prosperi is Co-Founder and CEO at M^0 Labs, and President at the M^0 Foundation. With a 20-year career dedicated to building, advising, researching, and investing in financial intermediaries, Luca Prosperi has been at the forefront of transformative change in the financial sector. His journey has seen him contribute to the evolution of some of the most impactful DeFi protocols, including his previous role in Lending Oversight at MakerDAO, and advising investors operating in this space.
Joao Reginatto is Chief Product Officer at M^0 Labs and has a wealth of experience in the stablecoin sector. Before joining M^0, Joao spent 8 years at Circle where he was VP Product for Stablecoins and led the development and launch of USDC and EURC, as well as multiple stablecoin infrastructure products. Joao has over 20 years experience in tech product development.
Jacob Laufer is Chief Growth Officer at M^0 Labs, where he leads efforts to expand the M^0 network and $M ecosystem. Jacob has extensive experience in stablecoins and DeFi, having served as a leadership council member for a large DeFi protocol while leading its treasury, partnership and core product teams. Jacob began his career at Solomon Partners, where he spent nine years as a restructuring and M&A investment banker.
Antonina Norair is the CTO of M^0 Labs, where she is leading the Protocol Web3 team’s initiatives to develop the next generation of on-chain cryptodollars. Prior to this role, she held senior engineering positions at ConsenSys, Compound Labs, and Moonpay
Marlowe Johnson is the Head of Onchain Integrations for M^0 Labs, working on the growth and expansion of $M, its extensions, and network at large. Previously, he served as the lead for DeFi business development at Circle and led the firm’s DAO and onchain entity strategy and engagement. With extensive experience as an anon contributor to multiple DAOs and protocols, Marlowe has been instrumental in shaping economic models and advising on stablecoin frameworks across the ecosystem.
Andrew Khang is the Deputy COO of the M^0 Foundation, where he leads special projects and supervises the evolution of the entity in its purpose of developing the M^0 ecosystem. Andrew first joined M^0 Labs as Chief of Staff in 2023 and has extensive experience operating companies across different industries, including HubSpot and GE.
Leadership Team - Crosslend
Marco Hinz is the Managing Director at CrossLend, where he leverages his extensive operational experience to drive the company’s strategic growth. Prior to his role, Marco served as Chief Operating Officer at CrossLend for over six years, overseeing key operational developments.
Leadership Team - MXON
Jacqueline To is the Head of Operations and is responsible for the operational build-out and smooth running of the first Minter on the M^0 network, MXON. Jac has over a decade of experience in traditional finance and crypto trading. She held positions in the Global Markets businesses at Barclays and JP Morgan, specializing in fixed income. After spending time at Circle, she joined HashKey to build out its trading and brokerage franchise, as well as token products.
Hubert Newell is the Senior Operations Manager at MXON. Hubert has 10 years experience working in the crypto space, working with successful projects like Circle, Blockfolio, Swan Bitcoin and Brave Browser. He has held lead positions in product management with many Web3 firms and led teams across the whole spectrum of operations. Hubert also founded Sharpdraw Consultancy, which helps startups in the Web3 space and advises funds wanting to invest in the space.
3. Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
[See above]
4. Has your entity or its officers/key contributors been subject to an enforcement action, criminal action, or defaulted on legal or financial obligations? Please describe the circumstances if so.
No.
5. Describe any conflicts of interest for your entity and key personnel.
N/A
6. Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
N/A
7. Historical tracking error in your proposed product, or similar to that being proposed Product 2024 2023 2022 2021
N/A
8. Brief reason for above tracking error
N/A
9. Please describe any experience your firm has in working with decentralized organizational structures
M^0 itself is a decentralized protocol, as well as a set of off-chain standards and APIs, and everything in the M^0 protocol must be achieved through decentralized governance. In previous capacities, members of the firm worked primarily or exclusively with decentralized organizations, leading to the architecture and design of M^0 to specifically serve decentralized and onchain organizations.
10. What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
The current collateral held by Minters in SPVs on the M^0 network is $158,326,891
11. How many of these assets held are present on Arbitrum One, if any?
While our infrastructure has been deployed to Arbitrum One and we have the ability to mint $M tokens, there are currently none present (besides nominal amounts for testing purposes). There is at least one integration in our pipeline which we anticipate will bring several millions of $M onto Arbitrum.
Plan design
1. Please describe your proposed product, including a description of the underlying assets and, if more than one asset, the proposed allocation among assets and general investment guidelines. Where appropriate, include targeted maturity mix and credit quality. Attach supplementary documents as appropriate.
We propose an allocation to $M – our permissionless, immutable wholesale stablecoin (currently) exclusively backed by short term t-bills (0-180day maturity). As part of being a pristine building block for stablecoins, $M has been designed to be the truest risk free proxy on-chain. The M^0 protocol is capable of passing protocol yield to governance-approved parties, as a function of the underlying collateral yield and governance parameter, currently at a rate of 4.15% APY. While this rate should roughly track the yield on the collateral portfolio, the M^0 protocol allows governance to express monetary policy while protecting the $M’s overcollateralization.
Our proposal is simply that the Arbitrum DAO allocate resources from the STEP 2 to acquire $M tokens on Arbitrum and hold them, accessing the treasury bill yield rate with the lowest possible friction and highest level of decentralization. Additionally, as more of $M’s underlying collateral is moved onchain (via partnership with previous STEP winner Superstate), we will be building towards any Arbitrum-native $M’s collateral also being on Arbitrum, ensuring maximum ecosystem alignment.
Do investors have any shareholder, investor, creditor or similar rights?
N/A
1. Describe the legal and contractual structuring for your product including regulatory bodies overseeing your business and the product and identifying all legal jurisdictions interacting with your product. Attach supplementary documents as appropriate
The protocol was built by M^0 Labs (The Thing GmbH), which is based in Berlin, Germany. Since the protocol is immutable, M^0 Labs, the M^0 Foundation (Switzerland), and any other affiliated entity, no longer has the ability to upgrade or control the protocol. Token holders, which include founders, team members, and investors (see www.m0.org for our list of investors) control a limited set of parameters in the protocol through the governance process. In M^0 governance, all token holders are required to participate or else lose 10% of their voting power per missed vote, providing a high likelihood that proposals are exposed and voted on by the entire set of governors. The primary function of governance in M^0 is to approve Minters, Validators, Earners, and updates to the Adopted Guidance. (Please reference the whitepaper and the Adopted Guidance for more detailed information).
2. Would Arbitrum’s assets be bankruptcy remote from your own entity and its officers/key contributors? If so, please explain the legal and contractual basis. On a confidential, non-reliance basis, provide any third party legal opinions to support the conclusions.
Collateral shall only be recognized as Eligible Collateral by the Validator if this collateral is appropriately held in the Collateral Storage.
Given the current technological conditions, and the nature of the Eligible Collateral proposed by the Adopted Guidance, with appropriate Collateral Storage we refer specifically to the fact that the entity that legally owns the collateral (SPV) fulfills a set of requirements as described below. The fulfillment of these requirements should be verified through cooperation between Minters (via appropriate transparency), Validators, and Governance oversight in a way deemed satisfactory by Governance. The appropriate execution of the Mandatory Contracts described above should satisfy those conditions.
Based on this set of fundamental requirements, the SPV:
- is an orphaned entity;
- is minimally affiliated (via its shareholders) with or (practically) controlled by any Validator or Minter or the affiliates of any Validator or Minter;
- does not conduct any other business except the storage of collateral for Minters and issuance of Notes to Minters;
- is a restricted-purpose vehicle that prevents entering into any other liabilities but the ones directly related to the storage of collateral and the issuance of Notes against such collateral;
- is designed to be insolvency remote;
- is incorporated in an Approved Jurisdiction, as described below;
- possesses all required licenses and permissions (if necessary) to store collateral and to issue Notes against such collateral;
- is audited on an annual basis by a licensed auditor deemed appropriate to perform the task.
Additionally, any Notes issued to the Minter shall comply with the following in order to be considered Eligible Collateral:
- Full asset segregation of collateral not only at the Minter level, but also at the level of each wallet address controlled by the Minter — in case the Minter controls more than one permissioned address.
- Limited recourse so that the claims of any Minter are strictly limited to the collateral belonging to its Notes.
Currently, our Adopted Guidance provides only for SPVs located in Luxembourg, with a long history of enforcing insolvency remoteness of these structures. Jurisdictions are only adopted if the jurisdiction provides legal and structural mechanisms that reduce the risk of insolvency for the legal entity, reinforcing the effectiveness of provisions that prevent creditors and investors from initiating insolvency proceedings against the legal entity or seizing its assets or the assets of its compartments, estates or sub-funds. Jurisdictions must uphold provisions that prevent creditors and investors from initiating insolvency proceedings against a legal entity or seizing its assets or the assets of its compartments or estates or sub-funds, thus ensuring the legal entity’s bankruptcy remoteness
How are Arbitrum’s assets protected vis-a-vis the bankruptcy of the brokerage or applicable financial institution (e.g., bank deposit insurance, securities insurance, etc.)?
The SPV aforementioned is bankruptcy remote. Assets held at custodian bank are not subject to a special insurance or coverage.
Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
N/A
1. Provide a detailed cash flow diagram that shows the flow of funds from ARB/Fiat conversion, investment in underlying asset, payment of expenses, sale of underlying asset, and repayment (Fiat/ARB conversion), including the counterparties and legal jurisdictions involved.
Arbitrum DAO can access $M liquidity onchain, by converting ARB to USDC, then USDC to $wM [Uniswap pool here]. For $M holders who do not wish to utilize secondary markets, direct purchase or sale requests can be made with Minters, assuming they are qualified entities and not based in a restricted jurisdiction such as the USA. The transaction requires KYC/AML checks with the BD Minter and potentially with the Corporate Service Provider. This process may take up to a week once all documentation has been received. There are no fees associated with either route (besides onchain transaction, Uniswap fees, and gas fees for the former).
2. Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
As $M and its yield distribution is entirely onchain, the holder of the token must determine its own tax liability.
3. Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
As $M is a non-custodial product and would be in the control of Arbitrum governance, liquidation could be undertaken immediately by accessing onchain liquidity against $M – or via a direct OTC transaction with a Minter. Current redemption times via Minter are T+1, while onchain transactions would be atomic.
4. What amount of first-loss equity will Sponsor provide to ensure over-collateralization, how is the first-loss equity denominated, and what is the source of capital?
3% equity buffer on account of maximum 97% ratio of minted $M to collateral
5. Describe the liquidity and stability of the proposed underlying assets, including anticipated settlement times from the sale of the underlying to the repayment of ARB.
$M is minted against U.S Treasury Bills (or associated tokenized asset USTB), representing the highest levels of safety, stability, and liquidity for an asset class. The SPV Operator shall also cooperate with the Minter to execute Retrieval Processes. When a Minter requests a retrieval of collateral with the SPV Operator, the SPV Operator shall verify that a respective RetrieveID is existing in the Protocol. Once verified, the SPV Operator shall timely sell a corresponding amount of collateral and/or use liquidity from maturity collateral maturing at the same day and transfer the amount requested to be retrieved to the Minter.
6. If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
$M is issued as an ERC-20 token (audits here) and made transferable and yield-configurable by the $wM contact (see audits above). The ability for a holder to Earn from $wM is controlled via onchain governance (portal here). Data aand pricing feed is provided by Chainlink (M NAV feed here)
7. Does the product rely on any derivative product (swaps,OTC agreements?
No
8. List all the third party counterparties linked to your assets including and not restricted to prime broker if any, custodian, reporting agent, banks for derivatives or loans and provide primary contact details for the third party counterparties
Currently approved SPV operators:
CrossLend GmbH
Leipziger Str. 124, 10117 Berlin, Germany
Asset Repository Sàrl
12E, rue Guillaume Kroll, 1882 Luxembourg, Luxembourg
Custodian:
DekaBank Deutsche Girozentrale
Mainzer Landstraße 16, 60325 Frankfurt am Main, Germany
Currently approved Validators:
Validator One GmbH
Friedrichstr. 114A, 10117 Berlin, Germany
Public Key: 0xEF1D05E206Af8103619DF7Cb576068e11Fd07270
Chronicle Labs
190 Elgin Ave, George Town Cayman KY1-9005, Cayman Islands
Public Key: 0xEe4d4938296E3BD4cD166b9b35EE1B8FeD2F93C1
Currently approved Minters:
Minter One Generator SPV Ltd.
171 Main Street, PO Box 92, Road Town, British Virgin Islands VG1110
9. Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
The M^0 network is strictly governed by the rules of the Adopted Guidance [link] which outlines proper collateral management, daily proof of reserves and prescribes legal agreements between counterparties ensuring that all collateral is held solely for the purpose of backing $M and cannot legally be moved except with the express signature of the validator stating that the collateral is no longer needed to back $M.
The investment mandate is similarly strict allowing for t-bills as the only eligible collateral. Protocol incentives ensure that Minters maintain proper collateral and update the collateral proofs every day.
Performance reporting
1. What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
$M yield is determined by the Earner Rate, a governance determined parameter of the protocol. It is expected that, throughout the cycle, the Earner Rate will remain comparable to the US Federal Funds rate. Currently, the Earner Rate is set at 4.15%.
2. Describe the content, format, preparation process, and cadence of performance reports. This should include proof of reserves, if appropriate. Please include a sample report.
Underlying collateral assets are validated and reported daily at https://dashboard.m0.org/
Please find additional information on Validators below:
3. Who provides the performance reports in respect of the underlying assets?
Validator One and Chronicle Labs provide the validation of the underlying assets held by our partner Minter, MXON.
4. Describe any formal audit process and timing of such audits.
N/A
Pricing
1. Provide a copy of your standard contract, or one similar to what is being proposed here.
$M has no pricing or contractual obligations.
2. Fee summary: Inclusive of the full scope of services requested. Product Fee schedule If asset based Fee calculation for our plan if asset based Annual fee if flat fee Any other fees (including redemption or minting fees)
Minters in the M^0 network will compete on purchase/sale fee structure. The current fee for purchasing or selling through MXON is $0. Once onchain, $M is tradable in a 1 bps UniV3 market with PSM-style (i.e. 1-tick) liquidity. Our liquidity partners will periodically rebalance this pool by purchasing or selling directly with MXON (and potentially other Minters), to ensure users have sufficient on-chain liquidity for their needs.
$M has no performance or management fee. M^0 is not involved in the distribution of yield or the collection of any fees from the product.
3. Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
N/A
Smart Contract/Architecture
1. How many audits have you had and name of auditors? Please provide a copy of reports.
$M underwent a series of extensive audits in Spring 2024 by top-tier firms, including Quantstamp, Three Sigma, Certora, ChainSecurity, OpenZeppelin, Prototech Labs, Sherlock, and Kirill Fedoseev.
The Multichain $M infrastructure, $M Portals for native bridging, was audited by Cyfrin, Asymmetric Research (internal auditor), and Kirill Fedoseev.
For more details, visit: Audits | M^0 Documentation
2. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
No, the project is governed by a decentralized governance system, which controls roles for actors such as Minters, Validators, and Earners. Transfers are fully permissionless, with no blacklisting functionality.
3. Is the product present on several chains? Are there any cross chain interactions?
Yes, $M is on Optimism and Arbitrum EVM L2s, also expanding to more EVM L2s, Noble, and Solana soon.
4. Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
The $M token is used as collateral in the UsualM extension, backing the USD0 token from Usual, and Noble’s USDN.
5. Is there any custom logic required for your RWA token? If so please give any details.
$M yield is distributed onchain via a governance proposal. The Arbitrum DAO would need to specify the address what will hold the $M tokens and (if different) the address what would be receiving the yield.