[TEMP CHECK] Onboard AUSD to Aave V3 on Avalanche

Governance New Asset
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[TEMP CHECK] Onboard AUSD to Aave V3

Authors: Agora
Date: October 22, 2024

Summary

This proposal seeks to onboard AUSD, a secure digital dollar backed 1:1 by USD fiat, to Aave V3 on Avalanche. AUSD, issued by Agora, serves as a stable and liquid alternative to USDT and USDC. With a growing AUM and robust liquidity, AUSD will enhance Aave’s liquidity pool, offering users a reliable and efficient stablecoin option with strong institutional backing.

Motivation

Agora offers AUSD, a digital dollar minted 1:1 with USD fiat. AUSD is designed to be a secure digital currency, utilizing one of the world’s largest custodian banks to safeguard assets. AUSD enables users to participate in trading, lending and payments. It is the most cost-efficient stablecoin to transact with due to its gas-optimized smart contract, making it ideal for traders and payments.

Agora operates an open partnership model, allowing collaboration with a diverse range of customers who meet KYB (Know Your Business) requirements and operate in jurisdictions we can serve. This approach contrasts with single partnership models (eg. Exchange-Backed Stables), ensuring that AUSD can be widely adopted across different ecosystems, providing liquidity and stability without conflicts of interest.

AUSD is currently available on Ethereum, Avalanche, Sui and Mantle, garnering $70+ million in TVL and $12+ million in daily DEX volume since contract deployment. The reserve assets are managed by VanEck ($100B+ asset manager) and custodied with one of the largest global banks, ensuring security and safety. AUSD’s unique value proposition also includes zero-fee minting and redemption facilities, making it an attractive asset for all ecosystem participants.

By integrating AUSD into Aave, users will gain access to a stable, liquid asset that supports trading, lending, and other decentralized finance activities. This integration aligns with Aave’s mission to decentralize finance while offering secure and reliable stablecoin options.

POL and Deposit Commitments

We can ensure that $1M+ will be deposited in initial Aave liquidity pools within 1 week of launch. We are working with Tier 1 market makers as well as large institutional firms. Agora already has 50+ institutions (trading firms, exchanges, payment companies, etc.) onboarded.

With Avalanche, in particular, strong additional liquidity programs will be put in place.

Specifications

  • AUSD Token Contract Address:
  • Chain: Avalanche to start
  • Audits: AUSD contracts have been audited by Spearbit and Certora, with zero critical, high, or medium issues identified. We also have conducted a risk audit with Chaos Labs and received an A grade.

Risk Analysis

  • Smart Contract Risk: AUSD contracts follow best practices and have undergone extensive audits by Spearbit and Certora, ensuring a secure and reliable smart contract architecture.
  • Market Risk: AUSD is backed by a portfolio of short-dated USD fiat money market instruments, with the majority of the allocation in overnight repo, which is T+1 for maximum liquidity. This backing minimizes volatility and ensures that AUSD remains a stable and reliable asset within Aave’s ecosystem.
  • Chaos Labs: A risk audit has been conducted by Chaos Labs and we have received an A grade.
  • Oracles: Various oracle providers support AUSD including Chainlink, Chaos, Pyth, API3, Redstone, and others.

Links

Gas Optimization, Bloomberg (Raise Announcement)

AUSD hits $100M in weekly volume on Avalanche.

Next Steps

  1. If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
  2. If the Snapshot outcome is YAE, this proposal will be escalated to ARFC stage
  3. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
  4. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal

Copyright

Copyright and related rights waived under CCO.

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Can you share the following information to the community can do their own risk assessment?

  • Smart contract audit: We were not able to find the link on your website.
  • Attestations of reserves by a 3rd party
  • Fee schedule for mint/redeem
  • Terms and conditions: to analyze the rights of the token holders that hold AUSD

Without these it is hard to do a proper risk assessment on AUSD and decide if it is safe enough to expose all depositors into the market to the risk of the asset.

Thank you

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Just to note, these are standard for all stablecoins, so likely they are available but I could not find them

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As the LFJ DEX (formerly named Trader Joe) holding nearly $10M in AUSD liquidity reserves, our core team is fully in support of the proposal to integrate AUSD into the Aave V3 protocol on Avalanche.

Since its launch, AUSD has gained strong traction not only in the Avalanche ecosystem but also across multiple chains. Agora’s approach—backed by their open partnership model and major custodians—provides a solid foundation for sustainable growth and stability.

At LFJ, we think AUSD’s inclusion to Aave will strengthen the Avalanche ecosystem by diversifying stablecoin options and fostering a more balanced DeFi landscape. By expanding beyond USDC and USDT, AUSD introduces a reliable alternative that supports and benefits the entire ecosystem.

We’re eager to see this proposal progress!

From Joe, The LFJ Exchange.

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Certainly!

Please find smart contract audits and attestations in our Developer Portal (https://developer.agora.finance/). Smart contract audits were performed by Spearbit (Cantina) and Certora. In addition to attestations, we are currently working with Chaos Labs do provide a Proof of Reserve feed that will be updated on daily intervals. This Proof of Reserve feed is expected to be live and publicly announced/available in the coming weeks - targeting the week before Devcon.

The fee schedule for mint/redeem is $0.00 for USD fiat.

Terms of use for customers of Agora and other associated policies can be found here: https://static.agora.finance/termsofuse.pdf

Best,
The Agora Team

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Thanks for the answer. Some additional questions:

  1. Why are attestations not broken down by CUSIP level? This is standard on most stablecoins (except for tether maybe)
  2. Why are attestations not issued and signed by a 3rd party? Also a standard that helps address conflicts of interest.
  3. When can we expect the attestation for close of month Sept? What is the expected timeline to issue such attestations after month close (esp since there is no 3rd party involved)?
  4. The rights of the AUSD holder are not clear to me by reading the T&C. Can you detail what the rights are in more detail?
  5. How are AUSD Reserves held? How are they bankruptcy remote in case of an Agora shutdown for any reason?
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  1. We provide a detailed CUSIP level break down to KYB’d onboarded customers of Agora.
  2. We are setting up with a monthly audit provider that can attest chain activity, the reserve fund is audited by PWC on a yearly basis. The existing monthly attestations were issued by our third-party accounting firm. We are planning to have the fund and year end audits made publicly available. Our primary focus was on setting up the PoR feed with Chaos Labs as soon as possible as this is a more granular, closer to real-time feed (better product and visibility than monthly attestations).
  3. Attestation for the month of September should be prepared for us by our accounting firm by the end of this week. Attestation via Chaos Labs PoR should be daily once that is live.
  4. The terms of use outline usage eligibility and links to risk disclosures (also here for convenience: https://static.agora.finance/riskdisclosures.pdf). You will find that these look very similar in language to older issuers like USDC, available on their website. For legal communication reasons, we need to stick to the language in the these documents and are not able to short-hand language.
  5. Agora Reserves are held in a State Street custodied and administered fund. This fund sits in a Reserve Trust to protect holders in the event of a shut down for any reason. VanEck is the asset manager that manages the overnight reverse repo, short-dated U.S. Treasury Bills and cash in the Agora Reserve Fund.
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  1. This is very bad. Expecting to list on Aave on Avalanche and have all depositors into Aave take AUSD risk, but not publishing the CUSIP level breakdown of the assets for all participants, as all other stablecoins do, is an unnecessary deviation from best practice. Given how easy it is, I would suggest not using a “trust me bro” approach on this.

  2. My guess is PWC audit will be done ~June 2025 (12 months after the launch), with Chaos Labs POR in the middle. But until that is ready, the only way users can trust the assets are there is a 3rd party accountant. This is understandable as a new asset, but I think also something that needs to be closed before Aave lenders are exposed to this risk.

  3. Who is the accountant? They have not signed the attestations, based on the content they seem to be issued by management, not a 3rd party.

  4. I understand the legalese language. However, it is worth noting that USDC was flagged as being an unsecured loan to Circle and having low property rights. This was flagged by S&P and uncontested by Circle at any point. I think this point should be further explored by a legal opinion.

  5. The question is less about the odds of loss of Agora Reserve assets, and more around bankruptcy remoteness. For this the best explainer is a corporate structure setup, at least detailing the Reserve Trust company name, jurisdiction and what is the means by which it is liquidated in case of bankruptcy (e.g. via deed, independent director, etc)

I am don’t want to be negative to AUSD, I think we need new stablecoins, but they need to be built correctly AND users need to be able to verify this and not just trust you guys.

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  1. You can find a CUSIP Level Breakdown for the latest month end attached (September 2024). These materials are available to our onboarded customers. We will consider updating our public site with monthly level CUSIP data for greater transparency. Our thinking was that POR would accomplish this with more granularity and increased frequency.
  2. Partially correct. We expect the PWC audit to be done around that time frame. The Chaos Labs POR is expected to be complete in the next few weeks, likely before AUSD would be listed on Aave, given the time allocated to ensure thoughtful governance process (which this feedback has been!).
  3. The accounting firm is JFDI. They issued the content, not management. To be clear, management issued the attached content to this response “09.30.24 - Agora Reserve Report”.
  4. We have secured our Reserve Fund assets in a Delaware Statutory Trust in a legally approved bankrupt-remote set up. We agree with S&Ps position on that providers structure.
  5. The assets are in the Agora Reserve Trust, a Delaware Statutory Trust. The Agora Reserve Trust is an LP in the Agora Reserve Fund. Please find the Agora Reserve Fund profile from DTCC attached and additional Agora Reserve Trust information linked here (AGORA RESERVE TRUST - LEI: 984500F5D7QF2AA36C85 | LEI Register).

Thank you,
The Agora Team

Agora Reserve Fund - DTCC.PDF (60.7 KB)
09.30.24 - Agora Reserve Report.pdf (83.3 KB)

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Clarification request

We have commenced a preliminary review of AUSD but note that certain aspects of its legal design are not publicly detailed. We request that Agora provide further information on the following points:

  1. What is the role of Agora Ledger Corp. (NMLS ID# 2567506) as referenced in the footer of https://www.agora.finance/?
  2. How is Agora Ledger Corp. related to Agora Blue Ltd., designated as the operator of the Agora platform?
  3. Is AUSD available exclusively to institutional clients, considering the prior comment regarding KYB’d onboarded customers?
  4. Which regulatory frameworks apply to Agora entities? What regulatory bodies oversee AUSD, and what licenses, authorizations, or permits do Agora entities possess?
  5. What is the bankruptcy remoteness design of AUSD? What assurances do tokenholders have for seamless redemption in the event of insolvency of Agora entities?
  6. In which jurisdiction(s) does the custodian operate, and where is the Reserve Trust established? Please explain the entire legal structure.

Thank you for providing clarity on these important regulatory, structural, and operational aspects of AUSD, which will help ensure a thorough understanding of the stablecoin’s framework and protections.

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Agree with @LlamaRisk asks.
There structuring of the product is still opaque for non-KYB’d holders at least.

On the bankruptcy remoteness, how is are the assets held at the trust connected to the rights of the AUSD holder? Meaning, if there is a banktupcy, it is not detailed in the T&C that I should claim my redemption 1:1 from the Reserve Trust. Is that in the deed? If so, I would suggest adjusting the T&C’s.

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  1. Agora Ledger Corp is a U.S. Entity registered with NMLS for the purpose of acquiring MTLs in the United States. Its activities are unrelated to AUSD.
  2. They are subsidiaries of the parent company and operate independently from one another.
  3. AUSD is only available for minting and repurchasing with KYB’d entities. AUSD is available on secondary markets for transfer. This is standard practice that all the major stablecoins, like USDT and USDC, engage in.
  4. AUSD is currently minted and repurchased out of the British Virgin Islands in accordance with BVI law and is not available to US persons or entities. Agora entities possess various licenses in various jurisdictions (eg. Agora Ledger Corp. possesses MTLs in the United States). We plan to be a multi-product organization and not all activities are relevant to AUSD.
  5. This has been outlined in above comments.
  6. The Reserve Trust is a Delaware Statutory Trust. The cash custodian and fund administrator of the Agora Reserve Fund, State Street, operates globally.
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Thank you for your response.

We have confirmed that Agora Ledger Corp. possesses an MSB license; however, Agora does not appear on the list of registered entities maintained by the BVI Financial Services Commission.

We would appreciate the provision of any applicable exemptions for your product, relevant legal opinions, or supplementary documents concerning bankruptcy remoteness. The structure involving Reserve Trust is of particular interest to us. We are prepared to enter into a Non-Disclosure Agreement with Agora to facilitate access to the trust deed and any additional materials regarding the structure.

The best place to get in touch is our public telegram channel:

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The current proposal has been escalated to TEMP CHECK Snapshot.

Vote will start tomorrow, we encourage everyone to participate.

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The current TEMP CHECK Snapshot has ended recently, reaching both Quorum and YAE as winning option with 823,000 votes.

Therefore the TEMP CHECK has passed.

Next step will be the publication of an ARFC to continue gathering interest from both community and Service Providers.

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How are people here OK with adding a stablecoin which has not issued an attestation since August and whose attestations are self-reported (not signed by an accountant/auditor)?

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