Steakhouse Financial: RWA-backed Flagship USDC MetaMorpho Vault Whitlisting

1. TLDR:

  • Steakhouse will be launching a USDC MetaMorpho vault that will initially lend against tokenized T-bills (Backed Finance’s bIB01) on Morpho Blue markets.
  • Backed’s bIB01 is a ERC-20 token that tracks the price of the iShares $ Treasury Bond 0-1yr UCITS ETF.
  • Going forward, Steakhouse’s focus will be on curating vaults that enable stablecoin lending backed by RWAs, bridging real-world yields with DeFi. Our roadmap includes adding new collateral assets and vaults.
    • Future collateral assets could include other tokenized T-bills, longer-term treasuries (e.g. bIBTA), corporate bonds (e.g. bERNA), or other yield-bearing institutional securities.
    • Future vaults could include other stablecoins, including non-US denominated stablecoins and KYC-ed stablecoins.

2. Introducing RWA-backed Steakhouse USDC MetaMorpho Vault

MetaMorpho vaults make lending simple for passive lenders. By supplying their idle liquidity into the vault, lenders earn yield and delegate risk management to the vault curators, who abstract the complexities by selecting risk parameters (e.g. appropriate collateral, LLTV and oracles) on behalf of users.

The inaugural USDC vault curated by Steakhouse Financial will initially lend against tokenized T-bills, namely Backed Finance’s bIB01. bIB01 is an ERC-20 token backed by IB01 (Blackrock’s iShares 0-1 yr US Treasury ETF). Suppliers to the vault can earn a passive yield by lending their USDC to over-collateralized borrowers, who in turn provide bIB01 as collateral for their loans.

We believe bIB01 makes an ideal collateral asset, thanks to the price stability of the underlying treasuries. At the time of the writing, IB01 had a 3-year standard deviation of 0.63% and a yield to maturity of 5.2%. Volatile and non-yielding assets like BTC and ETH are often subject to low Loan-To-Value ratios in lending markets to the detriment of capital efficiency. bIB01’s stability is a desirable attribute for enhancing capital efficiency.

With circulating supply of ~$47m, bIB01 is currently available for issuance and redemption for non-US professional investors only. The registration process requires KYC - details can be found here on Backed Finance’s website. As such, the borrowers on the USDC (bIB01) market on MorphoBlue will initially be restricted to authorized users. The USDC MetaMorpho vault is permissionless and open to anyone who supplies USDC.

Source: Tradingview

While the USDC vault will start with only the USDC (bIB01) market, it is meant to be extended over time to other opportunities such as other T-bill like products from other issuers and/or other public securities. Depending on liquidity management, markets using cryptocurrencies as collateral might be added, though selection will remain on blue chips.

The objective of the vault will be to generate stable and low-risk yield by mainly supplying to markets with Real-World Assets (RWA) as collateral.

3. Whitelisting Vault Contract

It is possible that the USDC MetaMorpho vault will receive $MORPHO rewards from supplying to incentivized markets on Morpho Blue. To allow the vault to transfer these potential $MORPHO rewards to depositors, we propose whitelisting our vault address. The vault address will be provided once launched.

4. About Steakhouse

Steakhouse Financial is a crypto-native advisory group dedicated to advancing and scaling blockchain-based financial infrastructure. Our team of collaborators brings a wealth of experience in financial advisory, analytics and legal research. Our chefs are consultants to some of the largest DAOs and DeFi projects and have amassed domain expertise in stablecoins and RWAs.

  • @sebventures (Founding Chef)
    • Implemented RWA-strategy at MakerDAO since 2020
    • Focus on merging DeFi and traditional finance to create a better financial system: crypto-banking
    • Asset-Liability Management geek
    • PhD in Data Science from Strasbourg University
  • @adcv (Founding Chef)
    • Lead contributor to the Finance Workstream at Lido DAO, contributor to the Strategic Finance Core Unit at MakerDAO
    • 10 years of experience in finance, consulting, and operations including M&A advisory and investment banking and as a turnaround manager for a small business
    • MBA from INSEAD, MSc Industrial Engineering and BSc Electrical Engineering from EPFL
    • CFA Charterholder
  • @aes (Founding Chef)
    • Team leader of the Strategic Finance Core Unit at MakerDAO
    • 10 years of finance, consulting, and operations experience including Thermo Fisher Scientific (NYSE: TMO), and Deloitte Consulting LLP
    • BS in Finance & Management from Northeastern University
    • Passed all three levels of the CFA exam
  • @equanimiti (Lead Financial Chef)
    • Contributor to the Finance Workstream at Lido DAO and manager of a liquid token fund
    • 10 years of experience in investment management. Former equity fund manager overseeing few billions in assets on behalf of institutional clients
    • Master of Finance from Massachusetts Institute of Technology, BA in Mathematics from New York University
    • Passed all three levels of the CFA exam
  • @dsm (Chief Legal Chef)
    • Contributor to the Strategic Finance Core Unit at MakerDAO
    • 8 years of experience including capital markets transactions and U.S. securities law at Latham & Watkins.
    • JD from Cornell Law School, BA in Philosophy & Political Science from University of Toronto
    • Admitted to practice in the state of New York

5. Disclaimers

PLEASE REFER TO OUR FULL DISCLAIMERS HERE

6 Likes

Hey @Steakhouse

Thanks a lot for your proposal
I’m 0xloh, Growth Lead at Morpho Labs

Steakhouse’s proposal for curating a USDC MetaMorpho vault lending against tokenized T-bills, (with at inception Backed Finance’s bIB01), is a great step towards bridging real-world yields with DeFi via passive lending experience. Steakhouse Financial credentials with Maker’s DAI RWA onboarding make them a prime curator for the Morpho Blue Ecosystem

Including diverse collateral assets like tokenized T-bills, longer-term treasuries, and corporate bonds demonstrates a commitment to expanding lending current offering, which is lacking this flexibility. The focus on stablecoin lending backed by RWAs aligns with the industry trend and the substantial onchain demand for risk-adjusted stablecoin yield

Strongly in support of this proposal

2 Likes

Hey!

How will the liquidations work? Afaik there is no liquidity for bIB01 on DEXes, so it only makes sense to liquidate collateralized by bTokens positions for those who have access to redemptions on Backed. Would be cool to see more info on this topic.

1 Like

The nature of bIB01 make it possible to liquidate slowly. Therefore, this will be done by people with accounts with Backed. You are right that sustaining an healthy and diversified ecosystem of such liquidator will be important.

bIB01 themselves are permissionless, so we expect at some point permissionless liquidity to emerge as well.

Would be great to see your thoughts on the risks for lenders associated with the nature of b-tokens.

I understand that bIB01 is supposed to be a stable asset. Tho we know that in some cases it can lose its value and trigger liquidation events (bankruptcy of custodian or whatever). So I’m personally interested in:

  • possible scenarios when bIB01 lose its value;
  • who is expected to be liquidators - if we’re talking about people with accounts on Backed, should lenders know more about these people (how many people with accounts on Backed do we have? Is the process for creating new accounts open and transparent)? Eg if we currently have 2-3 people with accounts and creating a new account is not easy, liquidations could be problematic;
  • what are the risks here (in connection with the question about bIB01 losing its value) - eg I guess no one will want to liquidate if the custodian goes bankrupt?

It’s rather questions about a framework for working with RWA (issued by Backed or any other issuer), not about specific bIB01 case.

Thank you @Steakhouse for submitting this proposal.

The Morpho Association will create the corresponding snapshot vote next week.

We encourage people to become liquidators to create an healthy liquidation market. Onboarding at Backed isn’t very complicated if you can, it’s standard KYC/AML. We are quite confident to have more than 2-3 people at launch. Disclosing the identity of some at launch is maybe possible depending on legal implications.

On the scenario where bIB01 (or most similar RWA) lose signifiant value (i.e. unrelated to TradFi market fluctuations) would be a tail risk. You mentioned a custodian that goes bankrupt. This would freeze the redemption for bIB01. A custodian going bankrupt shouldn’t lead to a loss of collateral but can create some delays. Partial or complete loss of collateral wouldn’t be expected, but anything is possible even if very unlikely.

If such a situation should occur, it is unclear if immediate liquidation would be beneficials as the price would certainly very low if any at all.

We don’t have exact data but custodian going bankrupt seems to be many order of magnitude lower than smart contract failure or hacks.

You can read a paper on custodian risk made by the ECB here (it applies in Europe, unclear if Switzerland is under the same regime but should have something similar).

Steakhouse disclaimers

1 Like

Thx for a detailed answer!

I agree that a situation when we need liquidators is unlikely for bIB01-vault. However, it’ll be more likely for other RWAs, whose prices are more volatile (e.g., tokenized stocks). Hope we’ll see more transparency in terms of liquidators when you start onboarding new RWAs.