kip: 40
title: Termination of Treasury mStable Position
category: treasury investment
author: 50 (jonofeaby4@gmail.com)
status: final (adopted)
created: 2022-01-31
replaced-by: none
replaces: KIP-22
Proposal
Terminate mStable position and swap imUSD funds to USDC.
References
[1] KIP-22
[2] mStable Forum Post: The Path Forward for mStable
[3] Investment Transaction 1
[4] Investment Transaction 2
[5] Rook DAO Treasury Holdings
Background
Over the past year the treasury has held an active position of roughly $1m with mStable as a way to generate yield on our stablecoin assets. The two transactions (each $500k) made to establish the position can be found here [3] and here [4], respectively. Recently in an mStable forum post [2], a core mStable contributor called the medium-to-long term viability of the project into question citing multiple potential sources for concern, including but not limited to:
- Lack of project runway
- Difficulty to raise capital due to token concerns
- Inability to create self-sustainability with the available product revenue flows
Due to these facts, the Treasury Team has subsequently decided to review our position as outlined in KIP-22 [1], and feel it would be prudent to withdraw our liquidity. This is a risk-management decision motivated by risks of potential negative impact to our financial standing; although not definite, we believe it best to err on the side of caution in situations of this kind.
Details
At the time of writing, the Rook DAO treasury holds $1,021,259.75 [5] in the mStable / imUSD vault, earning roughly 2% yield. This position was opened in the interest of fostering a partnership with the mStable team and for the past year the position has performed as expected. In the time that has passed between the opening of the position and the present day the needs of the Rook DAO treasury and the situational stability of mStable have changed considerably. With the DAO looking to refine and reassess our treasury positions going into the new year and the uncertainty of the imUSD product in the future, we are taking the initiative and initiating this proposal before our holdings are exposed to any serious impact.
If enacted, the underlying capital will be withdrawn into USDC and held in the treasury as the Treasury Team looks to develop new opportunities to make these assets productive.
In the interest of continued good relations, the Treasury Team has reached out to the mStable team regarding the situation with the goal of providing full transparency around our motives and actions.
Investment amount and type
As outlined in KIP-22 [1], the mStable position was initiated for the purpose of yield generation. Rook’s position with mStable is $1.021 million as of the time of writing.
Expected benefits for Rook
The expected benefits of this proposal are as follows:
- Protection from locking or loss of Treasury funds due to events out of our direct control.
- ~$1m of treasury capital to be made liquid and available for future initiatives/investments.
- Ability to monitor mStable and the broader market for developments and opportunities while reducing risk to our core stablecoin holdings.
Monitoring and Reporting
The Treasury multisig will report to the DAO upon completion of the trade, which will end with the return of the full position, in USDC, to the Treasury portfolio.
Specification
- Proceed with withdrawal of total deposits and related earnings ($1.021m) to 0x9a67f1940164d0318612b497e8e6038f902a00a4 (“Rook DAO Treasury”)
- Swap of the withdrawn assets (imUSD) to USDC
- Report back to the DAO upon completion of transactions