TLDR; The TMC recommends that the DAO votes for #Yes, Deploy Stablecoin Strategy The three possible combined outcomes are:

• YES, Deploy Stablecoin Strategy
• NO, Deploy Nothing
• Abstain The vote will be conducted via Single choice voting.

Key changes:

• The Arbitrum Foundation has expressed that they’ll be converting 15M ARB to Stablecoins per their internal policies.
• In terms of the process to withdraw stablecoins to cover service provider shortfalls, we will define this process soon in a separate forum post and be holding an additional Snapshot vote to avoid forcing delegates to make a decision on both issues within the same vote.
• No further changes have been made aside from splitting the vote into two separate Snapshots per the Community's request.

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Abstract

The TMC has divided the partner selection into two groups: one for managing the stablecoin allocation—which covers converting ARB tokens to stablecoins and their ongoing management—and one for managing the ARB allocation for on-chain strategies. Specifically, the plan is to convert 15M ARB into stablecoins and manage those on-chain, while the remaining 10M ARB is deployed on on-chain ARB-only strategies. Further information on the TMC mandate can be found here: Tally | Arbitrum | Treasury Management V1.2

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Shortlisted Proposals

Stablecoin Conversion. The Arbitrum Foundation has expressed that they’ll be converting 15M ARB to Stablecoins per their internal policies. Stablecoin Allocation (15M ARB Equivalent)

• Scope: This group covers the process of managing stablecoins. Partner Selection:
• Karpatkey
• Avantgarde & Myso
• Gauntlet

Allocation Strategy: The stablecoin management responsibilities will be evenly split among the three partners with a 33/33/33 distribution, ensuring diversification and balanced risk exposure while meeting the conversion and liquidity objectives.

TMC Recommendation

We recommend a vote of YES to deploy the Stablecoin Strategy. Our analysis shows that the stablecoin strategies presented by the selected partners meet our criteria for DAO alignment, returns, risk management, etc.

Voting Outcomes

Please cast your vote on each allocation separately. Your options are as follows: Stablecoin Strategy Allocation Vote:

• Yes: Proceed with converting 15M ARB into stablecoins and manage them via a 33/33/33 split among Karpatkey, Avantgarde & Myso, and Gauntlet.
• No: Do not execute the stablecoin strategy; retain current ARB holdings without conversion.

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Other Proposals

During our review process, we evaluated several proposals that ultimately did not meet the criteria, required further clarity, or didn’t align with DAO objectives.

• AnthiasLabs x XBTO: Their proposal did not provide adequate detail on stablecoin conversion, DAO alignment, or custody arrangements, which are critical to our objectives.

• August Digital: While proposing a single-sided AMM strategy for both ARB yield and ARB-to-USD conversion, the proposal provided minimal details. There was no evidence of existing ARB strategies or a dedicated vault, and the timeline for necessary audits—if smart contracts are involved—was not addressed. Moreover, the risk management section appeared generic, with much of the content seemingly repurposed from other contexts.

• Bracket Labs: The submission lacked clarity on key operational components, such as the choice of OTC counterparties or DEXes. Additionally, the rationale behind the 2% trading volume figure and the associated price impact considerations were not explained. Although a Stablecoin Vault is reportedly live, the lack of public transparency and reliance on historical yield figures from related funds (rather than the target vault) were significant concerns, compounded by high fee structures.

• WINR: The implementation details were insufficient, leading to concerns over the alignment of risk and reward.

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24.02.2024 Edit -- Further Clarification on Shortlisted Rationale

Stablecoin Strategies: Providers like Karpatkey, Avantgarde/MYSO, and Gauntlet stood out due to their provided backtests, clear execution plans, compensation structure, and risk management frameworks. We have high confidence in their ability to manage and deploy 15M ARB worth of stablecoins in well-established, low-risk protocols—aligned with the intended use of funds. The shortlisted proposals target an average yield of 8% to 12% under varying market conditions while primarily holding USDC and USDT. This is why we’re recommending a YES vote on the stablecoin allocation.

Stablecoin Strategy

|Stablecoin Strategy | Protocols Used | Exp. Returns | Fees| |--- | --- | --- | ---| |Gauntlet | AAVE V3 | 8% | Free| |Karpatkey | Uniswap v3, Camelot v3, Balancer v2/v3, GMX, Aave v3, Compound v3, Fluid, Vertex (Perps), Pendle (Yield) | 12-20% | 0.5% management| |AvantGarde/MYSO | AAVE V3, Compound (core), Pendle, Fluid, and Uni v3 (satellite) | 5-15% | 0.5% / 10% management/performance|

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Key Risks

Stablecoin Strategy

• Stablecoin Risk: The possibility of a stablecoin depegging.
• Smart Contract Risk: Exposure to potential hacks of the protocols used by each provider.
• Liquidity Risk: Funds may become locked if the lending rate reaches 100%.
• Optimization Risk: The provider’s optimization might not perform as intended or may fail to beat the benchmark.
• Custody Risk: Since the Foundation remains the custodian, custody risk is effectively transferred to the Foundation.

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Arbitrum Alignment Consideration: A key criterion for evaluating submissions was alignment with Arbitrum. While most strategies will be executed on the Arbitrum network, not all will involve Arbitrum native protocols.

There are multiple reasons for this but the main ones are the absence of proposals by Arbitrum native protocols and the fact that most liquidity on Arbitrum is on non-native protocols, making it difficult to allocate a large amount of stablecoin while retaining a competitive yield.

Given the dearth of sufficient proposals, our recommendation is to do nothing rather than something not justifiable from a risk-reward perspective.

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Edit 06.03.2025 V3

Further Clarification on the Shortlisted Rationale

Feedback on Karpatkey’s Proposal

Stablecoin Strategy

We appreciate Karpatkey’s detailed Risk Management Plan, which includes non-custodial architecture (Safe + Zodiac Roles Modifier), protocol whitelisting (Aave, Compound, Dolomite, Fluid, etc.), and clear maximum exposure thresholds (e.g., no more than 20–25% per protocol).

The yield estimates of ~8–12% for stablecoins appear realistic, and Karpatkey’s track record in managing other DAO treasuries (Gnosis, ENS, etc.) is well-documented.

Feedback on Avantgarde’s Proposal

Stablecoin Strategy

The Risk Management section shared by Avantgarde (and MYSO) highlights position-sizing constraints, lockup safeguards, and a diversified stablecoin approach. We especially appreciate the plan’s clarity on monitoring liquidity needs and the ability for the DAO to recall funds if necessary.

Expected returns of 5–15% are in line with typical DeFi yields, and the approach includes established protocols such as Aave, Compound, and Uniswap.

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Reminder of Grading Criteria

Our evaluation of proposals was based on the following key factors:

• 25% – Experience & Track Record: Demonstrated ability to manage treasury assets securely and effectively.
• 25% – Risk Management: Strength and clarity of risk mitigation measures under diverse market conditions.
• 15% – Alignment with DAO Goals: Consistency with the DAO’s growth objectives and ecosystem utility enhancement.
• 15% – Expected Returns: Realistic yield projections and sound risk-adjusted performance metrics.
• 20% – Transparency & Reporting: Commitment to regular, clear reporting and continuous performance monitoring.

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Timelines & Next Steps

We will move forward with a vote on Snapshot next Thursday, March 27, 2025.

ARB Conversion & Stablecoin Management (15M ARB)

IF YES, the Stablecoin strategy is deployed:

• Initiate a three‑month phase to convert 15M ARB into stablecoins via the Foundation.
• Proceed with the deployment of low‑risk, yield‑bearing strategies for the converted stablecoins, with regular performance and risk reporting.

IF NO, the Stablecoin strategy is not deployed:

• Retain the current ARB holdings without conversion.
• No further actions will be taken regarding stablecoin management until a new decision is reached.

Additional Next Steps for Both Allocations Three months after the managers have been elected, publish a comprehensive report detailing the performance and management outcomes and re-evaluate the allocation strategy for potential adjustments.