Non-Constitutional: Stable Treasury Endowment Program 2.0

[SEEDGov]

After consideration, the @SEEDgov delegation has decided to “FOR” on this proposal at the Snapshot Vote.

Rationale

From our perspective, STEP is one of the best-executed programs within the DAO.

Several strong points allow us to continue trusting the team designated for this task:

• The choice of Service Providers, including web2 institutions like Blackrock and web3-native entities like Mountain and Ondo among the selected ones, demonstrates not only reliable criteria but also a strategic deployment of funds between reputable actors from different sectors.
• The dashboard was handy for tracking the funds’ evolution, although we would add more on-chain info for each holding and more details of the transactions made, providing greater clarity on the dates each investment was executed, the current location of the funds, etc.
• The reporting has also been useful, though it would be reasonable to observe the intra-month variations of each holding more easily. For instance, to observe the addition of TBILLs from OpenEden, one must compare the reports from November and December as there is no written mention or graphical indication. Despite this, the periodic updates on changes to the backing of each asset are highly valuable information.
• The estimated budget costs seem reasonable, considering that less time will be required to review applications from service providers who already participated in STEP 1.
• As expressed by @L2Beat, perhaps in the future, this work could fall under the scope of the TMC and GM, all within a comprehensive Treasury Management strategy that we hope the OpCo will develop in coordinating these initiatives. Meanwhile, STEP has proven its value and should continue, as these precedents will aid in developing the mentioned plan, providing the DAO with experience, links to service providers, and a clear framework for executing the strategy.

To expand on the current board’s criteria, we highlight the transparency and reasonability for rejecting applicants:

@thedevanshmehta

• No investment restrictions, especially worrisome if a provider can use leverage and hedging at discretion of the manager. As one of the committee members expressed, we need something beyond common sense that stops a provider from taking our money and putting it into Argentinian peso bonds.

• Segregated portfolio companies with multiple portfolios are an added risk. Bankruptcy remote is not just having separate bank accounts, creditors look at whether entities are in actuality separate (their own board meeting minutes, payroll with staff, etc) so that the subsidiary entities do not get rolled into the parent one during proceedings.

• Products with a tiny AUM, exposure to a single ISIN or having fund managers without extensive prior experience or outsourced to third parties are riskier bets

• Providers using their own proprietary blockchain or solely that of a competitor were passed on in this round

• Decentralized governance of underlying assets which require additional due diligence and/or have exposure to the Foundation for the same add an extra layer of unpredictability

• Redemption procedures have a lag period measured in weeks or months or are limited to a single stablecoin that is not USDC, USDT or DAI or require a bank transfer

• Insufficient documentation such as not providing a PPM, investment memo, counterparty for reverse repos, guidelines, restrictions, having annual audits only or from unknown auditors or managers

• High fees that are uncompetitive in the current rates environment

• Appears unlikely unlikely to develop secondary market liquidity to underwrite against

• Operationally burdensome and requires more active oversight than is desired since individual issuances mature without auto-roll

All these points speak to the committee’s due diligence before approving or rejecting a Service Provider, which we highly value.

We hope they continue on the same path, prioritizing the security and liquidity of the invested assets.