Yield-bearing stablecoin issuer Mountain Protocol raises $8 million in Series A round

Mountain Protocol, the issuer of the yield-bearing USDM stablecoin, has raised $8 million in a Series A funding round.

Mountain Protocol said Thursday that Multicoin Capital led the round, with Castle Island Ventures, Coinbase Ventures, and other investors participating. Martin Carrica, co-founder and CEO of Mountain Protocol, told The Block in an interview that this was a pure equity round. He declined to comment on the valuation.

Carrica said the Series A round brings Mountain's total funding to $12 million. The company raised $4 million in a seed round last September.

What is Mountain Protocol?

Mountain Protocol is the issuer of USDM, a yield-bearing stablecoin "backed entirely by U.S. Treasuries." Mountain says it is regulated by the Bermuda Monetary Authority and keeps USDM reserves in bankruptcy-remote accounts, separate from the company's operating accounts. USDM is a rebasing ERC-20 token, backed one-to-one with the U.S. dollar, and currently provides about a 5% yield.

The Mountain protocol was launched last October, and USDM's current total supply stands at about 50 million tokens, with almost 40 million tokens on Ethereum alone, Carrica said. The stablecoin's current main use case is managing treasuries of decentralized autonomous organizations (DAOs), Carrica said, adding that with fresh funding in place, Mountain is looking to expand its use cases and grow its supply.

USDM growth plans

Mountain plans to grow USDM issuance by expanding support to new blockchains such as Solana, Aptos, Sei, and Monad and integrating it into more DeFi protocols. It also plans to partner with fintech firms, crypto exchanges and market makers to grow the stablecoin's supply.

"Market makers and traders are holding about 20% of their book on stablecoins. If they are able to hold that book on yield-bearing stablecoins and then continue engaging in their activity, they are very interested in doing the swap," Carrica said.

Carrica targets 10x growth in USDM supply to 500 million tokens by year-end and 10x growth to 5 billion tokens by 2025. 

USDM isn't available in the U.S. and some other jurisdictions such as OFAC-sanctioned countries.

Yield-bearing stablecoins

Carrica said yield-bearing stablecoins are required to grow crypto adoption and increase stablecoins' current total market share from $160 billion to $2 or $3 trillion in the future.

"I do think the market share of yield-bearing stablecoins will be 80% to 90% of all stablecoin market share five years from now," Carrica said.

Earlier this week, Paxos International, a UAE-based entity of Paxos, also launched a yield-bearing stablecoin called Lift Dollar (USDL), with Argentina as its first market. USDL provides "really the risk-free" return, Paxos' Charles "Chad" Cascarilla told The Block.