Tokenized Sovereign Debt vs Stablecoins with M1X Global

A sovereign issuer onchain

Goldman describes the Republic Of The Marshall Islands as a former US territory in the Pacific that has dealt with banking and payment issues. Mark Lurie calls the country "ground zero" for the correspondent banking problems that stablecoins were meant to solve. USDM1 also carries the country's UBI program: Goldman says it runs for 20 years, and every citizen can receive up to 10% of their annual income each quarter. Payments go through the Lomalo app, which was announced alongside CrossMint and uses a self-custodial wallet.

Brady Bonds, not gift cards

Goldman says stablecoins are a corporate exposure built to mimic the dollar. USDM1, by contrast, uses the blockchain as its register and follows the Brady Bond model under New York law. He says about $150 billion of Brady Bonds have been issued historically, with $10 trillion traded in secondary markets, and that none has ever defaulted. Lurie compares the difference to dollars versus a gift card. Every unit has a treasury held by a trustee, and he says that under New York law the trustee must liquidate it when a holder asks for their dollar back.

Netting for institutions

Lurie says USDM1 is designed to be held by banks and counts as a high quality liquid asset under Basel rules. He adds that Anchorage has announced support for it. In his view, netting in crypto works operationally but is not legally enforceable, because bankruptcy courts let counterparties "cherry pick" trades. He estimates that enforceable netting probably reduces required collateral by 90%.

Goldman calls derivatives a $700 trillion market where netting eliminates tens of trillions of dollars of risk every year. He says crypto's derivatives market is roughly the same size as its spot market, which is out of line with traditional finance, and he names netting as a core primitive that has been missing.