A cryptocurrency protocol called M^0 has built decentralized infrastructure that allows any institution to mint stablecoins backed by U.S. Treasuries. Today, it’s announcing both a $35 million Series A raise and the deployment of the layer atop Ethereum.
Decentralized finance continues to face the issue of how to attract the type of liquidity afforded legacy finance. M^0 is an on-chain protocol—the term for a set of rules that govern how data is transmitted between entities on a blockchain—that wants to solve this. To do so, it’s created a solution that, if successful, could create a global network for institutions to mint, in the words of M^0, “cryptodollars,” which are leveraged by their assets.
M^0 previously raised $22.5 million in seed funding led by Pantera Capital in early 2023. The Series A raise and launch phase also drew support from Galaxy Ventures, Wintermute Ventures, and GSR, among others.
As crypto-focused venture capital firms spring back to life following a bear market, the fact that M^0’s round is led by Bain Capital Crypto sets it apart even more. With $185 billion in assets under management, Bain’s scope reaches far beyond crypto, from life sciences and insurance, through to private equity and real estate. As a “larger and more diversified investment company,” the support from Bain illustrates a growing consensus that stablecoins are going to play an increasing role in the global economy over the coming years, Luca Prosperi, president of the M^0 Foundation Council, told Fortune.
Stablecoins currently boast a market capitalization of over $160 billion, but are expected to reach a trillion-dollar valuation by 2030. For holders, stablecoins promise a noncustodial, 24/7, international fiat-backed currency that settles immediately. By tokenizing Treasuries, stablecoins generate yield for issuers, which are “some of the most profitable financial companies in the world,” Teddy Fusaro, president of Bitwise, previously told Fortune. In the U.S, the yield of 10-year Treasury bonds is at 4.32% as of June 4.
There are at least 182 different types of stablecoins in circulation, according to DefiLlama. Some are simply built on top of existing banks, while others, like Tether’s USDT, are independent entities with reserves that also include precious metals and Bitcoin.
M^0 wants to unify the market by minting coins that “all look the same, smell the same, are fully fungible,” but to do this in a way that is independent from the legacy financial system, says Prosperi. In other words, a software stack isn’t simply being built on top of banks but rather is “inventing part of the legacy structure that creates the digital money.”
While Prosperi envisions M^0’s infrastructure being available for “anyone,” institutions will need to be compliant with local regulations. In the U.S., there is currently no regulation permitting banks to issue their own stablecoins. As a result, this won’t be a target market.
“Stablecoins are the largest and fastest growing asset for settlement on public blockchains today. We expect this market to continue to grow quickly to trillions of dollars over the next decade, Stefan Cohen, a partner at Bain Capital Crypto, said in a statement.