Anchorage enters stablecoin arms race with Mountain Protocol buy and USDM wind-down

Crypto-focused bank Anchorage Digital has announced the acquisition of USDM yield-bearing stablecoin issuer, Mountain Protocol. In a statement on May 12, the company said the deal would lead to increased adoption of stablecoins by institutions.

According to the announcement, Anchorage has signed a definitive agreement with Mountain Protocol and now awaits regulatory approval and customary closing conditions to finalize the deal.

It said:

“We are excited to announce that Anchorage Digital has signed a definitive agreement to acquire Mountain Protocol, the Bermuda Monetary Authority regulated company behind the USDM stablecoin.”

With the deal, Anchorage Digital will integrate Mountain Protocol technology, the team, and its licensing framework to expand its stablecoin capacities. The company noted that the stablecoin sector is seeing massive growth and wants to position itself to allow institutions to participate.

Anchorage already offers a stablecoin reward program for institutions holding the PayPal PYUSD stablecoin and is one of the partners in the Global Dollar Program. Thus, it sees the acquisition as another step in its long-term stablecoin strategy. The company CEO, Nathan McCauley, also echoed this.

McCauley said:

“By acquiring Mountain Protocol, we are taking a significant step forward in supporting institutional stablecoin adoption and advancing a new era of safety, security, and regulatory compliance in the global digital asset ecosystem.”

Meanwhile, Moutain Protocol CEO Martin Carrica added that the deal represents a landmark achievement in the crypto industry. He noted that the company’s stablecoin expertise, plus Anchorage Digital infrastructure and regulatory backing as the only crypto bank in the US combined, will make for a formidable team to meet growing stablecoin demand.

The announcement did not disclose any financial details about the deal, even though it noted that Mountain Protocol recently completed an $8 million series A funding with Multicoin Capital as the lead investor.

Mountain Protocol to sunset USDM

With the acquisition, Mountain Protocol has now disclosed plans to wind down its USDM stablecoin. The stablecoin issuer stated that the process will be smooth and transparent, starting with the end of the new USDMtoken minting on May 12.

However, all other features are expected to remain for a while. The USDM rewards will be available for 30 days, after which it drops to 0%, and users can start redeeming their USDM already.

According to the firm, primary customers can redeem their stablecoins through the Mountain Protocol Platform, while others simply swap USDM for other tokens through exchanges. The stablecoin only has a market cap of $35 million, according to Defillama, a significant decline from its peak of around $150 million.

Stablecoin sector continues to attract interest and investments

Meanwhile, the deal highlights the growing interest in stablecoins among investors globally, leading to acquisitions such as this in the space. With stablecoins offering a faster and more cost-effective way to transact, experts believe the industry has massive potential.

According to Citi, the stablecoin sector, which is worth over $240 billion presently and dominated by Tether USDT and Circle USDC, could be worth $3.7 trillion by 2030. The report added that stablecoin issuers could become the biggest holders of US Treasuries.

Given the potential, many firms ranging from crypto-native and fintech firms to traditional financial institutions are considering venturing into the space. A recent report from the Financial Times claims that asset manager Fidelity wants to launch its own stablecoin, which is already in the advanced testing stages.

The sector has also seen multiple deals recently, with Stripe acquiring stablecoin infrastructure firm Bridge for $1.1 billion at the start of the year and Circle recently buying tokenization startup Hashnote. Hashnote is the issuer of the $1.3 billion yield-bearing USDY token.

While deals continue to be made, the future of US stablecoin legislation is currently hazy, with the Stablecoin Bill in the Senate failing a procedural vote a few days ago.

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