# MIP105: The Real-World Asset Collateral Scope Framework ## Preamble ``` MIP#: 105 Title: The Real-World Asset Collateral Scope Framework Author(s): @rune Contributors: Tags: endgame, scope-framework Type: General Status: Obsolete Date Proposed: 2023-02-06 Date Ratified: 2023-03-27 Dependencies: Replaces: Ratification Poll URL: https://vote.makerdao.com/polling/Qmbndmkr Forum URL: https://forum.makerdao.com/t/mip105-the-real-world-asset-collateral-scope-framework/19688 ``` ## MIP105c1: Preamble The Real-World Asset Collateral Scope Framework defines the principles and processes related to the practical implementation of Real-World Asset Collateral allocation including direct exposure by Maker Core to stablecoins, and, during the pregame, direct exposure to advanced RWA collateral types including offchain and onchain bond products and complex loans. The Real-World Asset Collateral Scope Framework is subordinate the Stability and Liquidity Scope and the Physical Resilience Scope. ## MIP105c2: Scope Framework Articles ### 1: The Stability Advisory Council The specifications of the Stability Advisory Council are contained in *Decentralized Collateral 1*, and covers, in addition to its other tasks, advisory work related to the improvement of the elements in the Real World Asset Collateral Scope Framework. ### 2: The Implementation of the Real-World Asset Collateral Scope Framework through Software The Real World Asset Facilitators must in collaboration with the CVC Subcommittees, periodically review possibilities of integrating DAO toolkit innovation into the processes and content of the Scope Framework. ### 3: Real-World Asset Arranger management #### 3.1: Arranger definition Arrangers are Ecosystem Actors that specialize in sourcing, negotiating, structuring of, and reporting on, Real World Asset collateral types and maintaining and monitoring the underlying legal and operational real world structures used by the Maker Protocol. They must never be able to operate or influence the arranged legal and operational structure’s asset operations after the structures have been built and assets allocated hereto, and may earn a fee based on such Arranger activities. Arrangers cannot be Asset managers and are not allowed to actively manage or operate Real World Asset allocations on behalf of Maker. Arrangers are approved directly by MKR voters, and all RWA collateral exposure must be structured by an approved Arranger. #### 3.2: Active Arranger management This section handles the logic of adding and removing Arrangers. ##### 3.2.1: Arrangers are onboarded or offboarded based on a governance poll by MKR voters, that is initiated by the Real World Asset Facilitators if they deem it necessary. The active state of current approved Arrangers is maintained in *3.2.1.1A*. ###### 3.2.1.1A: ¤¤¤ List of current active Arrangers: * Monetalis * Blocktower ¤¤¤ #### 3.3: Arranger standard fees Arrangers may charge a maximum fee of 15 basis points per year on top of other fees charged by the structure and the Asset Manager. The fee is calculated based on the Debt Ceiling of the Arranger Vault, and may be charged up front for the follow quarter at the first day of the month preceding each quarter. For stablecoin Arranger services, Arrangers may charge up to 5 basis points. The fee is applied to the total amount of stablecoins that Maker has exposure to, that the arranger is providing Arranger services for. #### 3.4: Arranger concentration risk management The Real World Asset Facilitators must take action to search and propose onboarding of additional Arrangers when it is economically feasible to do so, in order to help reduce the concentration risk to individual Arrangers. Strict limits to the amount of assets that each Arranger services for must be developed and implemented in this section over time. #### 3.5: Arranger reports and stress tests Arrangers must publish quarterly reporting on each structure they have arranged, and must alongside the reporting publish stress test analysis that shows how the structures would perform based on historical financial crisis scenarios and other example scenarios. The Real World Asset Facilitators must periodically fund independent Ecosystem Actors to review and verify the quality and the results of the stress tests. Should an independent review produce an unfavorable result, the Responsible Facilitators must propose a governance poll for warning, temporarily deactivating, or permanently offboarding the Arranger and/or the Asset Managers connected to the discovered issue. #### 3.6: Arranger external legal counsel fee support The Real World Asset Facilitators have a budget available to pay legal costs related to legal research and first time setup of legal structures for arrangers. Arrangers that are supported this way must publish all research and conclusions related to the structure, to help other arrangers replicate the work and strengthen the Maker Arranger ecosystem. ##### 3.6.1: The Arranger external legal counsel fee support budget is described in *3.6.1.1A*. ###### 3.6.1.1A: ¤¤¤ The Arranger external legal counsel fee support budget is: Up to 1,000,000 DAI available per year. The full amount is immediately available at the start of the calendar year, and parts of it can be paid out through executive vote bundling when requested by the Real World Asset Facilitators. ¤¤¤ ### 4: Asset Managers #### 4.1: Asset Manager Definition Asset Managers are Ecosystem Actors that actively manage and deploy capital allocated by the Maker Protocol into a trust structured by an Arranger. Asset Managers are chosen by Arrangers, who must present the Asset Managers alongside the other details of new RWA deployment opportunities that they propose to Maker Governance. #### 4.2: Asset Manager onboarding and offboarding Asset Managers are not directly onboarded by Maker Governance, but are instead indirectly onboarded if they participate as Asset Managers in an arranged structure proposed by an approved Arranger and approved by Maker Governance. Maker Governance can similarly offboard an asset manager by executing such an action through a proposal by an Arranger. #### 4.3: Arranger and Asset Manager negotiations Arrangers must negotiate RWA deployment opportunities with Asset Managers, and when the terms of a deal is fully negotiated, bring the deal to Maker Governance to consider. Arrangers must not have any conflict of interest with Asset Managers, and must always strive to deliver the best possible terms, with an emphasis on providing competitive terms with efficient fees and other costs, while ensuring legal structure and financial risk is minimal. ### 5: Implementation of Real World Asset Stability Collateral #### 5.1: Definitions This Article covers how the collateral allocation rules for Stability Collateral defined in *Stability and Liquidity 3.2* is practically implemented with Real World Asset constructs. #### 5.2: Implementation of Real World Asset Stability Collateral This section the Active Elements that define specific Stability Collateral and its risk parameters. ##### 5.2.1: *Cash Stablecoin Implementation*. The Maker must target an exposure to Cash Stablecoins equivalent to 10% of the total Effective Circulating Dai supply. The breakdown of approved Cash Stablecoins and their individual parameters is described in *5.2.1.1A*. The Real World Asset Collateral Facilitators can propose a governance poll to change the approved Cash Stablecoins and their targets if they deem it necessary. ###### 5.2.1.1A: ¤¤¤ Active Cash Stablecoins and their parameters: | Cash Stablecoin | Effective Allocation | Stability Fee | Notes | |---|---|---|---| | GUNI-DAI/USDC 0.01% | 200 million Effective Allocation (As GUNI-DAI/USDC 0.01% contains 50% Dai this is implemented as up to a 400 million Debt Ceiling, but the Effective Allocation for the ALM model counts only as 200 million) | 0.06% | The Real World Asset Facilitators and other relevant Facilitators and Ecosystem Actors should work to replace this with a direct DDM as quickly possible | | USDC PSM | 100% of remaining Cash Stablecoin exposure after allocating to all other Cash Stablecoins | N/A | N/A | ¤¤¤ --- ##### 5.2.2: *Liquid Reserve Implementation*. Maker must allocate all excess Cash Stablecoins to Liquid Reserves through an automated mechanism. The list of approved Liquid Reserve assets and their parameters is described in *5.2.2.1A*. The Real World Asset Facilitators can propose a governance poll to change the approved Liquid Reserve assets and their parameters if they deem it necessary. ###### 5.2.2.1A: ¤¤¤ Active Liquid Reserve assets and their parameters: | Liquid Reserve | Effective Allocation | |---|---| | Coinbase Custody Rewards | 100% of excess Cash Stablecoins | ¤¤¤ ###### 5.2.2.2: A smart contract must move any excess Cash Stablecoin exposure into the Liquid Reserves, and must move any available Liquid reserves into Cash Stablecoins if the protocol is below its target Cash Stablecoin allocation described in *5.2.1*. --- ##### 5.2.3: *Secondary Stablecoin Implementation*. Maker may maintain a limited allocation to Secondary Stablecoins chosen by Maker Governance for their long term strategic value, if they meet specific requirements. The breakdown of approved stablecoins and their individual parameters is described in *5.2.3.4A*. The Real World Asset Facilitators can propose a governance poll to change the approved Secondary Stablecoins. The Real World Asset Facilitators must directly modify the listed parameters based on the calculations described in the subclauses to *5.2.3*, when it is relevant to do so. ###### 5.2.3.1: Secondary Stablecoins can receive at most a 200 million Debt Ceiling. ###### 5.2.3.2: To mitigate reverse concentration risk Maker may at most make up 50% of the total supply of a Secondary Yield Stablecoin. The Real World Asset Facilitators must periodically update the effective Debt Ceiling parameter in *5.2.3.4A* based on this calculation and following the update, bundle modifications to the live parameters in the Maker Protocol to be in line with *5.2.3.4A* in the weekly executive votes, with no Governance Poll required. The frequency of these changes are decided by the Real World Asset Facilitators based on the magnitude of change, the risk posed by the change, and other factors such as their current workload and bandwidth of Maker Governance. ###### 5.2.3.3: To be eligible for any debt ceiling, Secondary Stablecoins must pay a marketing reward, or other type of reward, directly as Dai to the Maker Surplus Buffer or through a legal structure, that results in a net income to Maker equivalent to at least 1.9% per year of the allocation to the Secondary Stablecoin. ###### 5.2.3.4A: ¤¤¤ Approved Secondary Stablecoins and their parameters: | Secondary Stablecoin | Debt Ceiling (DAI) | Yield Weight | |---|---|---| | USDP PSM | 0 | 0% | | GUSD PSM | 70 million | 2% | ¤¤¤ ### 6: Implementation of Real World Asset Yield Collateral Allocation #### 6.1: Real World Asset Yield Collateral Definition Real World Asset Yield Collateral is low risk collateral optimized for yield by a Protector Advisor Ecosystem Actor. #### 6.2: Protector Advisor Management and relative Allocation Protector Advisors are Ecosystem Actors approved by Maker Governance that each are delegated advisory responsibility for a part of the Real World Asset Yield Collateral. They are tasked with advicing Maker Governance on the optimal way to deploy their delegated allocation. The total allocation of Real World Asset Yield Collateral is evenly split between all active Protector Advisors during the Pregame. ##### 6.2.1: The Real World Asset Facilitators can propose to add or remove Protector Advisors if they deem it necessary, by submitting a Governance Poll. Protector Advisors and their Protector Advisor Relative Allocation (PARE)s of the Protector Real-World Asset Exposure are listed in **6.2.1.1A**. Protector Advisors are identified by their registered Ethereum Address. ###### 6.2.1.1A: ¤¤¤ List of Protector Advisors and their Protector Advisor Split: | Protector Adviser | ETH Address | PARE | |---|---|---| | Spring | TBD | 50% | | Viridian | TBD | 50% | ¤¤¤ ##### 6.2.2: Protector Advisor teams must monitor the allocation available to them and provide advice about favorable opportunities for allocating Real World Asset Collateral. The Real World Asset Facilitators must review these opportunities and may choose to allocate funding for the technical implementation, or request support from other Facilitators who must reasonably fulfil such requests. When Real World Asset Collateral allocation opportunties are ready to fully implemented, they must first be brought to a Governance Poll in the weekly governance cycle for collateral onboarding, followed by an Executive Vote, at a reasonable pace. #### 6.3: The ALM breakdown of Protector Advisor collateral allocation Protector Advisor collateral allocation must follow the following constraints: ##### 6.3.1: *ALM Tier 1.* The Protector Advisor can provide advice on allocations of up to (80% * PARE) - (existing ALM Tier 1 or higher allocation for the Protector Advisor) - (existing ALM Tier 1 or higher Protocol allocation * PARE) of new Yield Collateral of ALM Tier 1 or higher. --- ##### 6.3.2: *ALM Tier 2.* The Protector Advisor can provide advice on allocations of up to (65% * PARE) - (existing ALM Tier 2 or higher allocation for the Protector Advisor) - (existing ALM Tier 2 or higher Protocol allocation * PARE) of new Yield Collateral of ALM Tier 2 or higher. --- ##### 6.3.3: *ALM Tier 3.* The Protector Advisor can provide advice on allocations of up to (50% * PARE) - (existing ALM Tier 3 or higher allocation for the Protector Advisor) - (existing ALM Tier 3 or higher Protocol allocation * PARE) of new Yield Collateral of ALM Tier 3 or higher. --- ##### 6.3.3: *ALM Tier 4.* The Protector Advisor can provide advice on allocations of up to (12.5% * PARE) - (existing ALM Tier 4 or higher allocation for the Protector Advisor) - (existing ALM Tier 4 or higher Protocol allocation * PARE) of new Yield Collateral of ALM Tier 4 or higher. #### 6.4: Approved types of Protector Advisor Real World Assets Protector Advisors can only asses and advice on Arranger structures that enable allocation of Dai Collateral to asset types defined in this section. ##### 6.4.1: US Government Treasury Bonds, Notes and Bills. --- ##### 6.4.2: Money Market Instruments defined as investment-grade, highly liquid, short-term debt instruments that can be exchanged for cash within 5 business days. Allowed Money Market instrument types include: term certificates of deposit, interbank loans, money market funds/ETF, commercial paper, Treasury bills, and securities lending and repurchase agreements (“repos”). #### 6.5: Protector Advisor reports and stress tests Protector Advisors must publish quarterly reports for their total Protector Advisor allocation, and must alongside the report publish stress test analysis that shows how their total Protector Advisor allocation would perform based on historical financial crisis scenarios and other best practice example scenarios. The Real World Asset Facilitators must periodically fund independent Ecosystem Actors to review and verify the quality and the results of the reports and stress tests. Should an independent review produce an unfavorable result, the Real World Asset Facilitators must propose a governance poll for warning, temporarily inactivating, or permanently offboarding the Protector Advisor and/or the Arrangers and/or Asset Managers connected to the discovered issue. ### 7: Implementation of Clean Money #### 7.1: Clean Money Real-World Asset exposure restrictions As defined by the Maker Constitution, Maker may not have exposure to Real World Assets that directly finance coal use for energy or electricity production. This does not apply to metallurgical coal or other usecases of coal where a lower-carbon substitute is not available. ### 8: Legacy Real-World Asset Vaults #### 8.1: Legacy Real-World Asset Vault definition Legacy Real-World Asset Vaults are RWA vaults that were onboarded prior to the Maker Constitution, and that are not adopted into the RWA Scope Framework by being compatible with the specifications in it. They are not counted in the main rules and processes, except for their influence on the ALM model due to their duration risk, where they are considered a form of Protocol Exposure. They must be offboarded when it is reasonable to do so, considering the yield they provide compared to Yield Collateral of the same ALM Tier, and considering all other relevant economic and reputational factors. This article must be updated to contain the exact conditions and practical steps to execute the offboardings. ##### 8.1.1: In case that important changes must be made to the Legacy RWA structures to ensure they keep functioning correctly before they are offboarded, the Real World Asset Facilitators must propose these changes through the Weekly Governance Cycle.