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Tokenized real-world assets

USDM1 (Republic of the Marshall Islands)

Not approved The evidence weighs against it
Verdict
Not approved
The evidence weighs against it
Who can freeze it
No freeze key
Withdrawals
A holder redeems each USDM1 unit for one dollar at any time, according to the Republic’s law firm, Cleary Gottlieb.
Reviewed
2026-10-18 · next 2027-03-23
Researched memo

Summary

Ketju does not approve USDM1: the Republic of the Marshall Islands sells it only under Regulation S, so a US client cannot buy it, and the Republic has not published the indenture or any report on the collateral. USDM1 is a bond of the Republic. Its law firm, Cleary Gottlieb, describes a program of continuous Reg S offerings of ”tokenized perpetual adjustable-rate secured bonds,” up to an initial $100 million, first issued on 23 September 2025. The bonds exist only as book entries taken from token holdings, so the token is the bond. A holder may redeem each unit at any time for one dollar. The Republic invests the sale proceeds in short US Treasuries and pledges them to a US trust company as collateral agent. It keeps part of their yield, and the rest accrues to holders as new units. A holder therefore has two claims: one on the Republic, under a New York law indenture with a waiver of sovereign immunity, and a perfected security interest in the Treasuries. We cannot check the coupon formula, the Republic’s share of the yield, the redemption mechanics or the collateral balance, because the Republic has not published the indenture, the offering memorandum or any collateral report. On Ethereum one private key can upgrade the contract, freeze any address and grant itself the power to burn from any holder. Ketju will review USDM1 again if the Republic offers it to US investors and publishes the indenture and collateral reports.

Changes

2026-10-18The memo’s first sentence said Ketju does not approve USDM1, but the Register showed Under review. The Republic of the Marshall Islands sells USDM1 only under Regulation S, and that fact does not wait on missing evidence. Ketju changed the verdict to Not approved. The reasons and the review triggers did not change. The prior memo

Research

How it works

The obligor is the Republic itself; it did not set up a company or trust to issue the bonds. The Ministry of Finance says ”each unit of USDM1 represents a par-value sovereign obligation with enforceable rights against the sovereign, alongside a secured claim on the U.S. Treasury collateral.” Cleary Gottlieb, the Republic’s counsel, gives the legal form: perpetual adjustable-rate secured bonds, ”issued in dematerialized (electronic) and uncertificated form only, recorded in book-entry form based on the holdings of tokens issued on a blockchain network.” No separate register sits behind the chain, and the bonds have no transfer agent. The trustee, Surus Trust Company of North Carolina, administers the indenture and the collateral.

The bond has no maturity, so a holder gets cash back only by par redemption: ”holders will be able to redeem each of their bonds at any time for one U.S. dollar.” Interest does not raise the price of a unit. Cleary says it ”will be capitalized periodically,” which means holders receive more units. On the Solana mint that CoinGecko lists, the Token-2022 interest-bearing setting showed 196 basis points a year on 23 September 2026, well under the yield on short Treasuries. That gap fits the program: the collateral yield ”after deducting a designated portion representing the Republic’s gain” goes to meet redemptions. The Republic does not publish the size of that portion.

Collateral

The Republic invests each dollar raised in short US Treasuries, which Surus holds on a segregated basis and which the Republic pledges to Surus as collateral agent. Under the Uniform Commercial Code the collateral agent holds a first-priority security interest perfected by control, for the benefit of bondholders. The Ministry calls this ”a dual-recourse structure - to the sovereign and to the collateral.” It models the structure on the Brady bonds of 1989, which Treasury zero-coupon bonds held in escrow backed.

The collateral protects a holder more than the sovereign promise does. A waiver of immunity under New York law lets a holder sue the Republic in New York and win a judgment. But collecting on a judgment against a state is slow, and a holder can reach only commercial assets a court can seize. A small state may not keep such assets in New York. The Treasuries sit in the United States with a US trust company, under a lien the trustee can enforce without the Republic’s help. If the pledge works as described, a holder’s real exposure is to US Treasuries, to Surus as custodian, and to the terms of the indenture. We could not read those terms, because the indenture is not public, and we found no attestation of the collateral balance. The Ministry adds that ”No USDM1 can be created without collateral,” but no report shows the collateral matching the supply.

Eligibility

The Republic sells USDM1 only offshore. Its site says it ”has not registered any offering of USDM1 under the US Securities Act,” and that USDM1 ”may not be offered, sold, pledged or otherwise transferred in the United States or to US investors” unless registered or exempt. Cleary calls the offerings Reg S. Inside the Marshall Islands the first holders are citizens. The ENRA basic-income program, paid from the Compact Trust Fund, began paying on 26 November 2025, and a citizen may take the payment in USDM1 through the Lomalo wallet on Stellar. Outside the islands, the Ministry says it is ”enabling controlled access to USDM1 for qualified institutional counterparties.” Institutions ask through M1X Global, the Republic’s services provider. BitGo, Anchorage Digital and tZERO’s broker-dealer offer custody. The Republic publishes no minimum.

Who controls it

The Republic names Stellar, Solana and Canton as chains but publishes no contract address. Only the Ethereum contract (0x90a1717e…) is tied to the program by a primary source. Its verified implementation, USDM_V3, is signed ”@author M1 Global” and says it deploys the interest-bearing USDM1. It held about 177,000 units across 34 holders on 23 September 2026. It is an upgradeable proxy whose owner is one externally owned address, 0xc8b6df21…, which deployed it. That key can freeze and thaw any address, upgrade the code, and grant or revoke the minter-burner role. The role’s burn(from, amount) takes tokens from any holder, so the owner can burn a holder’s balance by granting the role to itself. Two contracts hold the role now, and the same key deployed both. The code forbids renouncing ownership.

Most of the supply is on Stellar: about 1.1 million units under the issuing account GDM5QWWX…, most of it inside Soroban contracts. That account sets no authorization, revocation or clawback flags and has one signer. The Solana mint has a single-key freeze authority. Neither address appears in any document of the Republic, so the eligibility file lists only the Ethereum contract until the Republic publishes its addresses.

Withdrawals

A holder redeems each USDM1 unit for one dollar at any time, according to the Republic’s law firm, Cleary Gottlieb. Cleary states that the yield on the Treasury collateral, after the Republic deducts its designated share, is applied to meet redemptions. The Ministry of Finance states that the trustee administers the par-redemption and liquidation rights. It adds that supervised institutions perform custody and redemption. Neither source states a redemption minimum, fee, settlement time or the party that receives requests, and the Republic has not published the indenture. Institutions outside the Marshall Islands ask for access through M1X Global, according to the Ministry. On Ethereum, one owner key can freeze any address and upgrade the contract. US persons cannot buy USDM1, so a US client has no redemption right to use.

Comparison

BENJI, BUIDL and USYC are fund shares: the holder owns a slice of a fund that owns Treasuries, under US securities law and with published holdings. USDY is a note of an Ondo company secured by Treasuries. USDM1 is the only one whose obligor is a state, and the only one whose governing document is private. A sovereign obligor adds little when the bond is fully secured, since the pledge carries the value. It adds risk where the terms give the Republic room, such as the adjustable rate and its share of the yield. We cannot finish the comparison until the Republic publishes the indenture.

Sources

Each claim above comes from one of these sources. Where Ketju could not verify a number, the memo states that.

The asset and the chain

This memo covers the protocol. A position also holds an asset and settles on a chain. Whichever of the three holds the most power over the position decides who can freeze it. These tables describe control and do not judge quality.

ChainVerdictFreezeWhat it can do
EthereumApproved No freeze key Ethereum has no sequencer, no upgrade key and no operator who can be compelled to act; rule changes require social consensus.
StellarNot approved Issuer can freeze freeze is native at every level: issuers hold revocation and clawback flags on their assets, and since Protocol 26 the validator quorum can vote to freeze specific accounts and trustlines on-chain (CAP-77).
SolanaApproved with limits Governed, no freeze no admin key can seize funds, but stake is concentrating and the Nakamoto coefficient is below 25.
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