USDM is a yield-bearing stablecoin issued by Mountain Protocol, a Bermuda-licensed digital-asset business overseen by the Bermuda Monetary Authority. The token is backed by short-duration U.S. Treasuries held with regulated custodians (BNY Mellon and BitGo) and pays interest through a daily rebase to holders. The 1:1 USD peg is maintained while balances grow over time. USDM is being wound down by Mountain Protocol; Phase 2 of the orderly wind-down ended August 22, 2025 (Mountain Protocol transparency dashboard).
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This article explains the rebase mechanism, the regulatory structure that lets U.S. persons hold the token, the live yield, and how USDM compares to USDY, BUIDL, sUSDS, and Aave-USDC. USDM occupies a useful slot in the yield-bearing stablecoin landscape: it is the most permissive of the regulated-Treasury tokens for U.S. holders while keeping a 1:1 dollar peg that accounting systems can ingest without modification.
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USDM is an ERC-20 stablecoin that targets a $1.00 peg. The token is backed by short-duration U.S. Treasuries (under 6 months) and bank demand deposits, held in segregated custody. The issuer is Mountain Protocol Ltd., licensed under Bermuda's Digital Asset Business Act. Reserves are attested monthly by an independent accounting firm.
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The unique mechanic is the daily rebase. At 14:00 UTC each day, every holder's USDM balance increases by the day's accrued yield. A holder of 1,000,000 USDM with a 5% APR sees roughly 137 USDM added daily. The token price stays at $1.00. The balance grows. This contrasts with USDY (price rises), sUSDS (wrapper token redemption value rises), and Aave deposits (separate aToken accrues).
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USDM launched in September 2023. Total supply was $185 million as of March 2026. Distribution is roughly Ethereum (62%), Polygon (24%), Base (14%). The token is integrated into MakerDAO RWA vaults, Aave V3 markets on Polygon, and several DEXs on each supported chain.
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Mountain holds the underlying portfolio with two custodians. BNY Mellon custodies the Treasury holdings; BitGo custodies the dollar deposits and provides the redemption-window banking rails. The portfolio composition as of March 2026: ~85% Treasuries with maturities under 6 months, ~15% bank deposits at insured U.S. banks. Monthly attestations are published in the transparency dashboard.
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The USDM contract is an upgradeable rebasing ERC-20. A scaled-balance design (similar to Aave's aTokens) means every holder's balance scales with a global multiplier. When the multiplier increases, all balances increase proportionally. The increase is published as a transaction at 14:00 UTC daily.
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The headline APY is the weighted-average return on the portfolio minus a 50 bps annual fee paid to Mountain. With Treasuries at ~4.3-4.5% and deposits at ~4.5%, the gross yield runs ~4.4-4.6%, plus the fee compresses this to a net of ~5%. The slightly higher net APY than USDY (5.00% vs 4.65%) reflects Mountain's different fee structure and lower-cost custodian relationships.
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Eligible holders mint USDM by wiring USD to Mountain's bank. Redemption requires a $100,000 minimum. Settlement is T+1 to T+2 depending on banking holidays. Below the redemption minimum, holders rely on secondary-market liquidity.
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USDM's APY tracks the front-end Treasury curve minus the 50 bps fee. The recent path:

The yield has tracked the federal funds rate within a 30 bps band for the entire history of the token, validating Mountain's portfolio-management discipline. Each Fed cut compresses USDM proportionally with a 30-day lag as the portfolio rolls into newly issued bills.
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BNY Mellon is one of the largest U.S. global custodians (~$50T in custody). The Treasury holdings are bankruptcy-remote. BitGo is a regulated trust company holding the cash deposit leg. A custodian failure would freeze USDM redemption while assets are recovered through the regulatory process. The structure is conservative by stablecoin standards but is not eliminated risk.
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Mountain's Bermuda license is the foundation of its regulatory posture. A change in Bermuda's stance on yield-distributing tokens, or a U.S. determination that USDM is a security, could disrupt issuance and redemption. Mountain has been clearer than most issuers about its compliance roadmap, but the regulatory environment for yield-bearing stablecoins is unsettled. The pending stablecoin legislation discussed in Senate Banking would explicitly distinguish payment stablecoins (which cannot pay interest) from yield-bearing tokens (which become securities under SEC oversight).
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The rebasing ERC-20 is upgradeable through a Mountain-controlled proxy. Audits by ChainSecurity and Halborn cover the contract. The upgrade key is held in a multi-sig with timelock. The risk is small but present: a key compromise plus a malicious upgrade could drain reserves backing the token.
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The daily rebase increases balances. Some DeFi protocols and many corporate accounting systems handle balance increases poorly: the rebase looks like income, which it functionally is, but the transaction trail is non-standard. Wrappers (wUSDM) exist for use cases that need a non-rebasing token. The wUSDM redemption value rises while the balance stays constant.
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Secondary-market liquidity for USDM is shallower than for USDC. Curve pools hold $20-40 million of USDM-USDC liquidity, sufficient for normal flow but not for nine-figure exits during stress. A holder needing to exit at scale during a stress event would either wait for primary redemption (T+1 to T+2) or accept secondary discount (typically 5-30 bps under stress).
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USDM's distinguishing combination: U.S.-accessible, $1.00-pegged, 5% APY, regulated issuer. The closest peer is sUSDS (similar accessibility, similar APY) but with very different reserve composition (T-bills vs lending + RWA). USDY is non-U.S.-only but offers wider chain support and a different accrual model that some DeFi integrations prefer.
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Complete KYC with Mountain. Wire USD. Receive USDM in the connected wallet. The minimum mint is $100,000. The process settles T+1.
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Buy USDM on Curve (Ethereum), Uniswap V3 (Polygon, Base), or any DEX listing. Spreads are typically 5-15 bps. Acquired USDM rebases the same as primary-issued USDM.
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For use cases that need a non-rebasing token, wrap USDM into wUSDM. The wrapper holds USDM and accrues yield through a rising redemption value rather than a balance change. Useful for Aave deposits where the rebase mechanic conflicts with aToken accounting.
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Aave V3 on Polygon supports USDM as collateral. Pendle markets exist for fixed-yield exposure. MakerDAO's Spark Protocol has accepted USDM allocations from the surplus buffer in past governance votes.
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Mountain Protocol is licensed under Bermuda's Digital Asset Business Act (DABA), administered by the Bermuda Monetary Authority (BMA). The framework is one of the few jurisdictions globally that explicitly addresses tokenized-Treasury products with a clear regulatory perimeter. Three features matter for USDM holders.
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DABA requires licensed issuers to segregate customer reserves from corporate funds. Mountain's Treasury holdings at BNY Mellon and dollar deposits at multiple insured banks are held in customer-segregated accounts. A failure of Mountain Protocol the company would not directly affect customer claims on the underlying assets.
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The DABA framework requires monthly third-party attestations of reserves. Mountain publishes attestations through a Big Four firm. The attestation discloses portfolio composition, the custodians, and any reconciliation differences. The April 2026 attestation showed reserves at 102.4% of outstanding USDM (a small over-collateralization buffer).
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The Bermuda licensing is structured to allow U.S. persons to hold the token under specific disclosures. This contrasts with Ondo's USDY (which restricts U.S. persons via a Reg S structure) and BUIDL (qualified-purchaser only). USDM's U.S. accessibility is a deliberate regulatory choice that Mountain markets as a differentiator.
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Treasury teams comparing USDM to direct T-bill ladders should understand how the token responds to Federal Reserve rate moves.
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USDM's APY tracks the front-end Treasury curve with a 30-day lag as the portfolio rolls. A 25 bps rate cut in September 2024 translated to USDM dropping from 5.30% to 5.10% over 30 days, then to 5.00% over the following 60 days as the full portfolio rotated.
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A direct T-bill holder locks in the auction yield for the term to maturity. A USDM holder receives the rolling-portfolio yield, which floats. In a rising-rate environment, USDM transmits higher yield faster than a held T-bill ladder. In a falling-rate environment, USDM compresses faster.
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The 50 bps annual management fee is fixed. Mountain does not adjust the fee as rates change. In a 4.5% rate environment, the fee is ~11% of gross yield. In a 2% rate environment, the fee would be 25% of gross yield. The economics for holders deteriorate in low-rate regimes.
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USDM lives on Ethereum, Polygon, and Base. A treasury team holding USDM on Polygon for the 5% yield often needs to settle payments on Solana, Arbitrum, or Optimism — chains where USDM is not deployed. The unwinding sequence — sell USDM for USDC on a DEX, bridge USDC to destination, settle — adds steps and slippage.
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Eco Routes handles the orchestration. A team holds USDM on Polygon, submits an intent to settle 50,000 USDC on Solana, and Routes selects the path: a solver willing to source USDC on Solana in exchange for USDM-denominated value on Polygon, or a multi-leg route through Curve and CCTP. Solvers compete on the route. The team retains yield-bearing positions where they earn most while still settling counterparty obligations on the chain those counterparties prefer. See related context in stablecoin treasury APIs compared and stablecoin automation platforms.
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The tokenized-Treasury category has grown from under $700 million in late 2023 to over $5 billion by March 2026 (RWA.xyz Treasuries dashboard). USDM holds approximately 4% of that supply, making it mid-tier by size but the largest of the U.S.-accessible non-institutional options.
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BlackRock's BUIDL holds roughly 50% of the category by supply, driven by institutional uptake from prime brokers and large crypto-native funds. Franklin Templeton's BENJI holds ~12%. Hashnote's USYC holds ~8%. The remainder is split among Mountain (USDM), Ondo (USDY plus OUSG), OpenEden (TBILL), Superstate, and several smaller issuers.
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USDM's growth has been steady rather than explosive, reflecting the Bermuda-licensing strategy's emphasis on quality over speed. Mountain has prioritized U.S.-accessible structure and DeFi integrations over institutional-only deployment.
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Mountain has consistently kept USDM's net APY around the 5% anchor through Fed cycles by adjusting fee structures and portfolio composition. This is a marketing choice as much as a yield outcome — a clean round number is easier to communicate than a moving 4.65% or 4.80%. The actual yield will compress with future Fed cuts, but the stickiness of the 5% number through 2024-2026 is an interesting product-design choice.
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Yes. Mountain Protocol's Bermuda license and disclosure structure permit U.S. holders. The minimum primary-mint amount is $100,000; smaller positions can be acquired on secondary markets. U.S. holders should consult counsel on the SEC's evolving posture toward yield-distributing tokens.
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At 14:00 UTC daily, the USDM contract increments a global multiplier reflecting the day's accrued yield. Every holder's balance increases proportionally. A 5% APR translates to ~0.0137% balance increase per day. The token price remains at $1.00.
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USDM's net 5.00% beats USDY's 4.65% by ~35 bps. The difference reflects Mountain's lower-cost custodian arrangement (BNY Mellon plus BitGo, vs. Ondo's Morgan Stanley plus BlackRock investment-management overlay) and a slightly different fee schedule. Both portfolios target the same short-duration Treasury exposure. Read the digital dollars explainer for the broader stablecoin context.
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Aave V3 on Polygon lists USDM as a supported asset. The integration uses wUSDM (non-rebasing) under the hood to handle the rebase mechanics cleanly. Suppliers earn the USDM rebase yield plus any Aave supply rate, minus a small wrapper fee.
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USDM rebases (balance grows, price stays at $1.00). wUSDM is a non-rebasing wrapper (balance stays constant, price rises). Both represent the same underlying claim. Wrapping is reversible 1:1 through the Mountain app or a connected DEX.
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Comparable in credit risk. Both are backed predominantly by short-duration Treasuries with regulated custodians. USDM pays 5% APY versus 0% for USDC. The trade-off is the smaller issuer (Mountain vs. Circle) and the tighter liquidity in stress events. See automation platforms for related yield strategies.
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