Risks

What are the risks associated with the Cash Management Pool?

There are a number of risks associated with the Pool. We have taken all possible steps to mitigate risks. Information on some of the steps we’ve taken to mitigate risks are listed below.

Impairment Risk

While all investments incur risk, U.S. Treasury Bills are backed by the full faith of the U.S. Government and are considered one of the safest forms of debt around. Direct obligations of the U.S. Treasury have historically involved little risk of loss of principal if held to maturity.

Furthermore, loans to the Borrower have tight financial covenants which restrict the activities, maturity profile, and minimum equity cushion of the Borrower. The weighted average maturity of the Borrower’s portfolio is capped at 30 days under the Master Loan Agreement – this restriction materially mitigates interest rate risk as the Borrower is well positioned to absorb any unexpected mark to market losses and comfortably service daily withdrawals in a severe stress scenario.

Counterparty Risk

Credit risk is minimal as the Borrower is a bankruptcy remote SPV formed for the sole purpose of the Cash Management Pool, and separate from Room40's primary activities. The Maple loans are the only permitted debt in the Borrower's capital structure.

Maple Foundation, a third party Cayman domiciled entity, acts as Security Agent under the Master Loan Agreement. In an event of default, Maple Foundation will exercise its step-in rights over the Borrower’s custodial accounts and maximize the recovery of assets for the benefit of Lenders.

In terms of custodial risk, Lender deposits in the Pool are held in a non-custodial smart contract and Maple does not take custody of Lender deposits at any point. The deposits in the Pool are locked and only available to fund loans to the Borrower's whitelisted Fireblocks wallet and service Lender withdrawals from the Pool.

The Borrower's custodial risks are minimized by partnering with established and regulated counterparties. The pool's banking provider, prime broker and custodian is J.P. Morgan, a leading U.S. based global financial institution, considered systematically important by regulators. J.P. Morgan has more than $30 trillion in assets under custody as of 2023, and is one of the largest custodians in the world.

Contagion Risk

As with all pools on Maple, the Cash Management Pool represents a distinct smart contract and Lenders are ringfenced from credit risk in other pools on the Maple platform. Although certain borrowers on the Maple platform experienced credit events in the aftermath of 2022, Maple's infrastructure consistently performed as designed and any losses were confined to their respective pools.

Smart Contract Risk

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.

Protocol security is a top priority for Maple, and the 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.

USDC

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 U.S. 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 claims 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.