What are the risks associated with the Cash Management lending pool?
There are a number of risks associated with the lending pool. We have taken all possible steps to mitigate risks. Information on some of the steps we’ve taken to mitigate risk are listed below.
Impairment Risk
While all investments incur risk, US Treasury Bills are backed by the full faith of the US Government, they’re considered one of the safest forms of debt around. Direct obligations of the US Treasury have historically involved little risk of loss of principal if held to maturity.
Loans to the borrower have tight financial covenants which restrict the maturity profile, as well as the minimum equity support of the Borrower. Lenders have full recourse via an Account Control Deed to all assets held with regulated broker, enforced by the Security Agent, Maple Foundation.
The Maple Foundation, a separate third-party Cayman domiciled entity, was formed solely to serve as the enforcer in the case of a default. In an unlikely event of default, the Maple Foundation will step in to enforce Lender rights and maximize the recovery of assets for the benefit of the Pool.
Smart Contract Risk
Smart contracts increase their risk profile with the amount of value they hold. Maple’s smart contracts are expected to hold minimal USDC - the commercial intent is to lend the USDC to borrowers - thereby reducing the attractiveness of the Maple smart contract to a potential bad actor.
Maple smart contracts have consistently performed as designed since the protocol launched. Our smart contracts have successfully completed audits from leading firms in the industry Spearbit, Three Sigma and Trail of Bits and you can view those here. Recently Maple was awarded a 92% Defi Safety score - an increase from 91%.
Maple’s smart contracts are open-source. The Maple team also has an ongoing bug bounty with Immunefi to incentivize the reporting of high and critical severity bugs to the Maple incident response team so they can be addressed safely to protect user funds.
Created by Circle, a regulated FinTech, USDC is a trusted, widely accepted, and highly liquid digital dollar. USDC is 100% collateralized with a combination of cash and US Treasuries. USDC reserves are held in the custody and management of leading U.S. financial institutions, including BlackRock and BNY Mellon. Circle is regulated as a licensed money transmitter under U.S. state law. Circle’s financial statements are audited annually and subject to review by the SEC. As a regulated payment token, Circle claim that USDC will remain redeemable 1 for 1 with the U.S. Dollar.
Risk of Loss
Holding, lending, or borrowing digital assets involves a substantial degree of risk, including the risk of complete loss of those assets.