Before using a stablecoin, it's important to assess its robustness, and therefore, to look at the assets in the reserves that maintain its stability. Events like the depegging of UST with Terra Luna and USDC with Silicon Valley Bank show that this issue of backing is crucial.
Ensuring that a stablecoin maintains its peg at scale and maximizes its risk-adjusted returns requires professional management and advisory. This is why Angle is working with Steakhouse, a financial advisor for DAOs, which provides guidance to the Protocol, and ensures institutional-grade reserve management with one objective: to optimize the solvency, liquidity and yield of Angle's stablecoins.
So, what is USDA made of?
Angle's dollar stablecoin is backed by a reserve of various crypto assets that can be viewed in real-time via Angle Protocol's Analytics page.
The distribution of assets in the reserves is automatically rebalanced and continuously evolves to ensure perfect risk coverage. However, here are the main assets backing the USDA at the time of writing, along with the counterparty risks they entail:
steakUSDC from Steakhouse
steakUSDC is the most important asset in the USDA reserves at the time of writing — more than 40% of USDA backing.
It's an ERC-4626 token representing a share of a yield-bearing Metamorpho vault managed by Steakhouse Financial.
This vault, built on top of the Morpho Protocol, allows lenders to deposit USDC to provide liquidity for users who are looking for borrowing USDC using blue-chip collaterals such as ETH, BTC, and bIB01 (tokenized T-bills).
When depositing USDC into the vault, lenders — such as Angle Protocol — receive steakUSDC in exchange.
Why back USDA with steakUSDC and not simply USDC?
By depositing USDC into the vault (and receiving steakUSDC in exchange) Angle Protocol earns interest paid by USDC borrowers which are distributed to steakUSDC holders. This passive income is then redistributed to users of the Angle savings solution.
Angle policy has always been to create stablecoin systems with minimal trust assumptions and the lowest counterparty risks. With steakUSDC, Angle minimizes the protocol’s risk exposure by controlling the assets and collateral it is exposed to. Unlike other lending protocols, it is clear from the outset that by supplying the vault, Angle is only exposed to specific collaterals — here blue-chip assets.
Moreover, steakUSDC is liquid. Angle Protocol can easily exchange them for USDC in case many users decide to redeem their USDA for USDC.
USDC from Circle
In addition to steakUSDC, a small portion of USDA backing consists of USDC. This ensures that users of the Protocol can always and instantly redeem USDA for USDC and vice versa.
These USDC are located on different chains, allowing users to mint and burn USDA for USDC on Ethereum, as well as Optimism, Arbitrum, and Base.
USDM from Mountain
USDM is Mountain Protocol's USD stablecoin.
USDM is backed exclusively by short-term US Treasuries which makes it a low-risk USD-denominated asset. USDM can only be purchased directly from Mountain Protocol by Primary users with an active Mountain Protocol account requiring a KYB ("Know Your Business"): business's status verification, risk assessment, etc.
Secondary users can acquire USDM from Primary users, from other Secondary users or via decentralized exchanges (DEXs).
USDM's strength, aside from its 5% yield, lies in how quickly and easily it can be traded directly onchain, thanks to its secondary market. This flexibility is crucial for managing USDA. Indeed, the backing of USDA (which includes the USDM stablecoin) must be continuously adjusted to maintain the USDA peg. This means that Angle Protocol may need to sell a large amount of USDM quickly if someone wants to redeem USDA.
USDM deep secondary market is well suited for Angle rapid liquidity needs, and its fast redemption times on the primary market make it a perfect liquid asset to hold in a balance sheet.
USDM reserves are maintained in a bankruptcy-remote setup with collateral proof of reserves, third-party attestations, and regulatory oversight. However, the backing of USDM is less predictable compared to other products, such as Backed's bIB01. While bIB01 is a tokenized representation of a single ETF (IB01), USDM's backing involves multiple assets.
Finally, Mountain Protocol has incorporated BlackRock's BUIDL fund to its USDM reserves. This allows USDM to benefit from all BUIDL integrations, including atomic conversion with USDC.
We are proud to be a seed client for BUIDL and support institutional grade products that provide high quality backing to permissionless stablecoins.
BUIDL will provide investors with the opportunity to earn U.S. dollar yields by subscribing to the fund with Securitize…
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gtUSDAcore from Gauntlet
Just like steakUSDC, gtUSDAcore is an ERC-4626 token representing a share of a yield-bearing Metamorpho vault managed by Gauntlet.
With this vault, Angle Protocol lends USDA to users who can borrow it with collaterals such as liquid staking tokens (LST) and liquid restaking tokens (LRTs).
As a vault depositor, Angle earns interest paid by USDA borrowers. As with steakUSDC and USDM, this yield is also allocated to Angle savings depositors.
USDA deposited into the Metamorpho vault are pre-minted, meaning they are not immediately backed by collateral until they are borrowed. Once borrowed and managed by parties other than Angle, this new USDA supply is then properly backed. Furthermore, there are no specific risks associated with the fact that these USDA are pre-minted, compared to USDA that are already minted.
As for steakUSDC, the main risk lies in the management of the vault, especially if risky new collateral is accepted, which could lead to an increase in bad debt. However, Angle has a clear and transparent view of the vault and its accepted collaterals, allowing it to control the exposure of gtUSDAcore.
The size of Angle position into gtUSDAcore is also calibered so that it remains smaller than the assets held in steakUSDC or USDC, otherwise USDA borrowers could deplete the reserves in the Price Stability Module (aka the Transmuter) of the Protocol.
EURA from Angle
USDA and EURA are two independent stablecoins with separate balance sheets. The stability of one does not affect the stability of the other.
But how can there be EURA into USDA's reserves?
This is due to the liquidity needs of the EURA/USDA pair. At the USDA launch, Angle has seeded a Uniswap V3 pool with pre-minted EURA and USDA stablecoins. This pool enables users to exchange the two stablecoins at their forex value.
Thus, when EURA are swapped for USDA, the EURA are added to the USDA backing, and the USDA effectively enters into circulation.
The size of the EURA position in the backing has been determined so that EURA can never get a systemic importance in the overall USDA backing.
Finally, it’s important to note that steakUSDC and USDM are held on the Transmuter — Angle’s Price Stability Module. This system uses automated mechanisms to tracks all assets, and keep the exposure to each asset in the reserves within reasonable limits to maintain USDA's peg to the USD.
