Conversion of Treasury Stablecoins into sUSDS or TMMFs

TL;DR

This proposal requests the DAO’s approval to execute the TMC-6 strategy and handle the related operations to allow the DAO to generate returns on its stablecoin holdings.

Proposal details

The Treasury Management Committee (”TMC”) has approved the TMC-6 strategy to allow the DAO to generate returns on its stablecoin holdings (currently ~USD 30M in idle stablecoins). Under this strategy, stablecoin funds could be withdrawn from the DAO Treasury and subsequently converted into sUSDS or a tokenized USD money market fund of choice.

While the TMC is authorized to approve automated strategies that require further on-chain DAO confirmation and allow the DAO to object to execution, this particular strategy is not automated. This proposal seeks explicit DAO confirmation that the TMC and the Lido Labs Foundation and Lido Ecosystem Foundation (together the "Foundations") are authorized to execute the strategy and carry out the associated operational steps. This confirmation is limited to the specific strategy, parameters, and guardrails set out in TMC-6 and this proposal, and the TMC together with the Foundations will act solely as implementation agents within these predefined limits, without independent discretion to manage, reallocate, or otherwise deploy DAO assets beyond what tokenholders explicitly approve here.

It is proposed that the initial upfront conversion (via minting sUSDS from USDS at par, without slippage) will be manually handled by the multisig signers of wallets belonging to the Foundations, under the following token conversion mechanics:

• DAI can be exchanged for USDS at 1:1;
• USDC can be exchanged for USDS at 1:1 via the PSM (Peg Stability Mechanism), which currently has more than 3bn USDC in available liquidity;
• USDT may need to be traded for USDC, with low expected slippage (likely < 10 bps).

The USDC/DAI/USDT balances to be converted to sUSDS can be gradually drawn by the Foundations under the existing Easy Track smart contract instances.

The received stablecoins could be used by the Foundations in one of the following ways:

1. The resulting sUSDS may be returned to the DAO Treasury by a simple multi-sig transfer.
2. Pursuant to the approved EGG budget request, the Foundations are allowed to retain stablecoins or sUSDS for the payment of expenses until the next Easy Track limit reset, without being required to return such amount of sUSDS or stablecoins back to the DAO Treasury.
3. Where KYC/KYB restrictions apply, the Foundations, as agents and on behalf of the DAO, may also retain tokenized USD money market funds (e.g., BlackRock BUIDL, Fidelity Digital Treasury Fund, Circle USYC).

Operational implementation details

During the implementation of this strategy, the TMC and the Foundations will adhere to the operational principles and guardrails defined under TMC-6:

1. Yield-bearing cap: sUSDS plus tokenized money market funds (TMMFs) at or below 15% of total Treasury, checked quarterly and rebalanced if needed.
2. Liquidity floor: Total stablecoin liquidity, excluding whichever is greater of the sUSDS balance or the largest single TMMF position, must cover at least 2 months’ worth of DAO operating costs; if breached, liquid non-yield-bearing stables are rebuilt first before increasing sUSDS or TMMF allocations.
3. TMMFs: The TMC decides which TMMFs to onboard based on risk and potential rewards, legal and operational considerations, and then splits the yield-bearing allocation equally across all approved sUSDS and TMMF assets, with positions held by the Foundations on behalf of the DAO.

For a detailed description of the operational rules and guardrails, please see the relevant post on the Lido Research forum.

TMC Rotation

To support the implementation of this strategy and ensure robust operational execution, it is proposed to rotate TMC membership composition.

• @Karpatkey → @Armin
• @marcbcs → @zuzu_eeka