The RFP for STEP 2 is now open!
At current prices STEP has approximately $17M to allocate. Due to the limited size of the program, there will likely be a minimal number of allocations in STEP 2. That said, we encourage all applications and are looking forward to hosting future STEP programs.
For products that applied under STEP 1 and wish to re-apply, we ask that they comment under their old application in the Arbitrum governance forum with the following details;
- Start with a table of changes narrating all that’s different compared to last time. If you would like to know the reason for rejection in STEP 1, message Matt Fiebach [@Hut_4] on telegram.
- In the application form, whatever details have changed should be in a different color or highlighted in some fashion so the committee can easily know what is the same as last time and what is new.
- Updated and latest documents that you prefer not made public on the forum but which you want the committee to consider should be sent to rwa@dao.arbitrum.foundation
For new applicants, we ask that they create a new thread on the forum with their application here: STEP Applications & Updates - Arbitrum
Who Should NOT apply
Following learnings from the first edition of the program, we advise the following products to refrain from applying;
- Proportion of RWA is less & de-fi or crypto angle too high
- Involves equities having high volatility
- Not dollar denominated with foreign currency risk
- A derivative product or wrapper that is majorly built from other onchain RWAs
- Not launched yet
- Requires bridging to other chains. As the Arbitrum RWA space has matured since STEP 1, high priority will be given to products launched on Arbitrum by March 15th 2025
- Requires continual active decision making & operationally burdensome, for example individual issuances maturing without auto-roll
- Transparency issues such as: black box setups, multisig in control of executive team without legal protections, product is complicated with risk difficult to quantify.
- Products with a tiny AUM, exposure to a single ISIN or having fund managers without extensive prior experience or outsourced to third parties
- Insufficient separation between fund manager and investment manager
- No investment restrictions, especially worrisome if a provider can use leverage and hedging at discretion of the manager. We need something beyond common sense that stops a provider from taking our money and putting it into Argentinian peso bonds.
- 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
- 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
- Decentralized governance of underlying assets which require additional due diligence and/or have exposure to the Foundation add an extra layer of unpredictability
- Judged as not being bankruptcy remote, opening risk of creditors taking our funds in case of disputes. This criteria includes both service providers in a jurisdiction that is uncomfortable for the committee and segregated portfolio companies with multiple portfolios.
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.
If you think all these criteria are met, please read the application form below to send in your application.
Table of contents
- Summary and Arbitrum info · Introduction · Requester background
- Description · Asset information · Oversight · Scope of service/Criteria
- RFP process overview · RFP timeline · Participants
- Questionnaire · Applicant information · Primary contact · Key information · Background information · Plan design · Performance reporting · Pricing · Smart contract/architecture
- Supplementary
Summary and Arbitrum info
Introduction Arbitrum governance is seeking proposals from qualified applicants for the purposes of diversifying the governance treasury and supporting ecosystem growth.
The purpose of the RFP is to identify products that provide trading volume and depth (i.e., liquidity), are stable in value, produce income for governance independent of crypto market volatility, offer transparency, and can potentially see use in developing a nascent “real-world assets” sector on Arbitrum chains.
Applicants whose products meet certain quality thresholds will be presented to ARB holders and their delegates for possible asset allocation. All final asset allocation decisions rest with ARB holders and their representatives. This RFP is intended to both collect relevant information for the committee and also to recommend allocations for tokenholders to vote upon.
Requester background
Arbitrum governance maintains and upgrades the Arbitrum technology stack, upon which are built multiple blockchains, including the largest Layer 2 on Ethereum, with more than $1.6b in assets onchain.
Description
Asset information
This program is intended to convert 35,000,000 ARB into stable, liquid and yield earning assets. The dollar notional amount of this investment is subject to market volatility, but at the time of Feb 20th 2025 is valued at approximately $17 million. These assets do not have a specific futured obligation or liability they are matched against. The Arbitrum Foundation, a Cayman Islands legal entity, will be the transacting counterparty.
Oversight
The committee is comprised of 6 members including GFX Labs, Entropy Advisors, Karpatkey, Nethermind, and North Lakes Legal. The Arbitrum Treasury & Sustainability Working Group also serves as a non-voting member of the committee, except in the case of ties. As program manager of STEP 1, Steakhouse Financial is an observing member of the committee privy to discussions.
All members are required to recuse themselves for any application in which they have a monetary interest, direct or indirect.
The Arbitrum Treasury & Sustainability Working Group leads this process and answers to stakeholders within Arbitrum governance.
Scope of service/criteria
Please include the following as part of your proposal: Sample or template investment contract and the governing instrument (credit agreement, partnership agreement, etc.). Investment selection, monitoring, and reporting plan. Compliance requirements. Be specific about requirements you anticipate from Arbitrum governance.
RFP process overview
RFP Timeline, 2025
Submissions open : Feb 20th
Submissions deadline : March 20th
Finalists announced : April 20th
ARB holders vote on proposed allocation : May 1st
Participants
This RFP will be open to all applicants with a stable, liquid and yield earning product. The screening committee will review all submissions and announce allocation between finalists for ARB tokenholders to vote upon.
After receiving applications, the committee will prepare an allocation policy for distribution to applicants and recommend a split between them. The DAO will then vote on whether to approve the split or not. Funds will be given to providers in stablecoins or fiat transfers after signing agreements with the Arbitrum Foundation.
Questionnaire
Applicant information
Name
Address (Headquarters)
City, State, Postal Code
Country
Website
Primary contact Name
Title
Country
Email, Telegram, Forum, & other methods of contact
Key Information
Expected Yield
Expected Maturity
Underlying asset
Minimum/Maximum transaction size
Current AUM for product
Current AUM for issuer
Volume of transactions LTM
Source of first-loss capital
Basics and background
- How will this investment improve Arbitrum’s RWA ecosystem?
- Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
- Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
- 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.
- Describe any conflicts of interest for your entity and key personnel.
- Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
- Historical tracking error in your proposed product, or similar to that being proposed Product 2024 2023 2022 2021
- Brief reason for above tracking error
- Please describe any experience your firm has in working with decentralized organizational structures
- What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
- How many of these assets held are present on Arbitrum One, if any?
Plan design
- 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.
Do investors have any shareholder, investor, creditor or similar rights?
- 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.
- 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.
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.)?
Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
- 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.
- Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
- Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
- 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?
- 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.
- If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
- Does the product rely on any derivative product (swaps,OTC agreements?
- 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
- Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
Performance reporting
- What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
- Describe the content, format, preparation process, and cadence of performance reports. This should include proof of reserves, if appropriate. Please include a sample report.
- Who provides the performance reports in respect of the underlying assets?
- Describe any formal audit process and timing of such audits.
Pricing
- Provide a copy of your standard contract, or one similar to what is being proposed here.
- 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)
- Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
Smart Contract/Architecture
- How many audits have you had and name of auditors? Please provide a copy of reports.
- Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
- Is the product present on several chains? Are there any cross chain interactions?
- Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
- How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
- Is there any custom logic required for your RWA token? If so please give any details.
Supplementary
- Please attach any further information or documents you feel would help the screening committee or ARB tokenholders make an informed decision. If you prefer this not to be made public, it can be emailed to rwa@dao.arbitrum.foundation. Please mention in your application that documents have been emailed for committee review.