Mehen: USDM State Regulatory Fees

[GENERAL] Summarize your solution to the problem.

MUSD will be the 1:1 fiat-backed, directly-convertible stablecoin built for and by the Cardano Community.

Fiat-backed coin issuers need state money transmitter licenses. This proposal pays state fees

[GENERAL] Summarize your relevant experience.

Matthew Plomin, CFA

Matt has been involved in fiduciary TradFi for nearly fifteen years, managing US credit research for liquidity products. He has navigated multiple regulatory reforms in the US and European money market industries.

MBA, Economics, Quantitative Finance

[IMPACT] Please describe your proposed solution.

Cardano DeFi urgently needs a fiat-backed stablecoin, and Mehen is building that coin following the best-practices demonstrated by Circle’s USDC. The Mehen USDM coin will be directly-convertible 1:1 for USD, and is backed by fiat assets.

The stablecoin holds its peg because individuals can redeem it directly for $1. If the price dips, individuals can buy the coin on-chain and redeem it for fiat profit. If the price is too high, people can mint new coins for $1 and sell them on-chain.

This only works, though, if lots of people can easily and cheaply buy and redeem the coin.

To get lots of people, we need to have money transmitter licenses (or the statutory equivalent) in many states.

This proposal will help Mehen pay the state licensing fees required to file for money transmitter licenses in the listed states.

This route is more censorship and regulatory-resistant, since the various state regulators operate independently, and registering in many states allows the Mehen USDM coin to hold its peg if an individual state regulation becomes hostile toward cryptocurrency.

[IMPACT] Please describe how your proposed solution will address the Challenge that you have submitted it in.

Legal and regulatory costs are a meaningful part of the start-up and operating costs of Mehen. Among these costs is the application fee charged by the states.

This challenge is meant to provide funding to cover costs such as these.

[IMPACT] What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?

Creating a fiat-backed stable coin has several moving parts, and therefore several potential points of failure.

1) The primary risk is that a large stablecoin from another blockchain will notice the market need, enter Cardano and capture mindshare before we are able to launch or achieve scale.

We are mitigating this risk by building quietly, designing the stablecoin with community-oriented features that are uniquely appealing to the Cardano Community, and building the Mehen brand ahead of launching the coin.

2) Failure to raise enough funds to meet the minimum requirement of assets on hand to maintain licenses or pay licensing fees

To mitigate this, we are seeking Project Catalyst funds. A second, less appealing option is to approach VC funds, who would expect ROI to go to them, not to the community

3) Our stable coin is not widely adopted by the Cardano community and therefore does not become self-sustaining

If the people of Cardano do not readily accept and use the Mehen stable coin, then we have misjudged the needs of the community, and would need to adjust accordingly by performing more market research and remodeling the business structure.

4) ID/KYC becomes too cost prohibitive to keep end user costs low.

If the cost of meeting the legal requirements of our licenses exceeds revenue, the stable coin becomes unsustainable. We would need to raise onboarding fees, making the barrier to entry higher.

Another risk is that we will not have adequate internal operational policies, training, and screening tools to achieve a successful result from the state licensing examiners.

We are mitigating this risk by aligning our processes with industry best-practices, and engaging third-party testers and auditors to review and modify our processes if needed.

5) Finally, licenses can be denied due to other personal and operational factors that are evaluated during the licensing process. These include personal criminal background checks, financial records, and professional experience. IT systems reviews are also included.

We are mitigating these risks by pre-screening team members and building our systems to the highest standards for safeguarding personal information and guarding against exploits.

[FEASIBILITY] Please provide a detailed plan, including timeline and key milestones for delivering your proposal.

Mehen is already registered and able to operate in 3 states.

We have the required KYC/AML policies and internal procedures to achieve successful outcomes at the state licensing reviews. We have already registered with the NMLS, and are ready to begin the formal process to get these licenses. We have already gathered the necessary documentation.

The application process has three key milestones:

1. Filing paperwork for licenses
2. Application review and additional document needs
3. Result

Timeline:

Immediately: Upon successful funding of this proposal, we will begin filing our documentation to receive a Money Transmitter License with the states and territories listed in our budget breakout. This process is fairly straightforward using NMLS.

90-120 days past filing: Licenses will be reviewed and state examiners will request additional documentation or clarification on certain items

3-6 months: Receive result and Money Transmitter License

This timeline varies by state, of course, but should generally fall within this timeframe.

Note: Many online service providers who charge crazy fees to guide applicants through this process (such as Faisal Kahn) exaggerate the time needed to achieve state licensing. This is done to generate fear in their potential customers and exaggerate the need for their assistance.

[FEASIBILITY] Please provide a detailed budget breakdown.

This funding will cover licensing fees in the following states:

ID 

$100.00

MO 

$300.00

UT

$300.00

DE 

$402.50

DC 

$500.00

ME 

$500.00

NH 

$500.00

NV 

$675.00

LA 

$800.00

MS 

$800.00

ND

$850.00

AL

$1,000.00

IN 

$1,000.00

NE 

$1,000.00

OR

$1,000.00

VA

$1,000.00

WA

$1,000.00

WV

$1,000.00

KT 

$1,050.00

MA 

$1,300.00

IA 

$1,500.00

NC

$1,500.00

RI

$1,500.00

SD

$1,500.00

KS

$1,750.00

AZ 

$1,875.00

CT 

$1,875.00

[FEASIBILITY] Please provide details of the people who will work on the project.

The team is fully doxxed on Mehen.io.

[FEASIBILITY] If you are funded, will you return to Catalyst in a later round for further funding? Please explain why / why not.

Maybe. Total license cost for all states we would seek to operate in would be around $97,000.

This funding proposal covers the 27-cheapest states and territories. We may be able to operate comfortably within these states, and achieve stable values for the USDM stablecoin with only these states. Hopefully, we will be able to generate sufficient income to self-fund the additional states.

[FEASIBILITY] Are you or any member of your team working on any other proposals in this Fund9?

[FEASIBILITY] Are you or your team working on any other proposals from previous Funds?

[AUDITABILITY] Please describe what you will measure to track your project's progress, and how will you measure these?

We would measure our progress along each state’s licensing path.

[AUDITABILITY] What does success for this project look like?

Success is promptly receiving a favorable outcome from our licensing examinations.

[AUDITABILITY] Please provide information on whether this proposal is a continuation of a previously funded project in Catalyst or an entirely new one.

This is an entirely new proposal.