M0 Foundation MAP (Monetary Adaptation and Policy) Group, October 6, 2025
The M0 Foundation Council and related parties convened last week for the latest MAP meeting to review M0’s systemic monetary policy levers. The MAP is publishing this memo to document changes already executed since the last meeting as well as to propose additional parameter updates.
Since the last update, both the Minter Rate and Earner Rate were adjusted from 4.15% to 3.83% through the priority proposal process. This off-cycle update was proposed, approved and executed to maintain timely alignment with macroeconomic conditions following the Federal Reserve reducing policy rates at its September FOMC meeting. Acting outside of the standard monthly cadence ensures that M0’s system parameters remain synchronized with the prevailing rate environment, preventing mispricing in minter and earner economics and preserving confidence in the protocol’s monetary design.
Following last week’s meeting, the MAP is proposing to increase the Mint Ratio from 98.00% to 99.00%.
The Mint Ratio balances two key functions in the M0 system:
- Maintaining overcollateralization to ensure M token solvency and confidence in downstream integrations.
- Enabling capital efficiency for Minters, who rely on leverage within protocol-defined limits to achieve operational scale and sustainable returns.
While the M0 system was kicked-off with an extremely conservative Mint Ratio level, this 1% increase would grant ecosystem Minters more appropriate capital efficiency and operational flexibility while not materially affecting M overcollateralization in the current interest rate environment.
The below table illustrates at which interest rate levels the entire overcollateralization buffer is eroded away for a portfolio with a residual average maturity of 180 days. This is a conservative estimate as effective portfolio duration tends to be lower given allocation across the front end up to 180-days. Considering the current Mint Ratio of 98%, rates would need to move to 8.29% to erase the 2% overcollateralization buffer in case of immediate portfolio liquidation. Analogously, in case the Mint Ratio were set to 99%, the 1% buffer would be lost if rates moved to 6.11%.
Needless to say that these are elevated values considering the short-term maturities of eligible treasuries and therefore the risk of actually reaching these levels and losing the entire buffer is extremely remote.
Table 1: interest rates at which overcollateralization buffer gets wiped out due to losses on a portfolio with 180 days maturity
On the capital efficiency side, for every $100m in TVL growth, a 1% increase in the Mint Ratio frees ca. $1m in minter equity. This reduction in capital requirements allows Minters to scale more efficiently while maintaining operational buffers against protocol penalties.
Applying the proposed change to the Mint Ratio at current eligible collateral levels results in ca. $8m being freed from the equity buffer across the M0 minter network, as shown in the table below.
The MAP is also proposing to decrease the Penalty Rate from 5 bps to 1 bp.
The Penalty Rate is the charge applied when a minter fails to meet required operational obligations, such as timely collateral updates or exceeding permitted debt. Adjusting it to 0.01% maintains an effective deterrent against non-compliance while balancing for proportionate impact in light of the significant increase in total value of the M0 network.
As always, the MAP will continue to monitor macroeconomic conditions, collateral market dynamics, and system-wide capital efficiency to ensure the robustness and stability of the M0 protocol.
About the M0 Foundation
The M0 Foundation focuses on facilitating the protocol's governance and ecosystem development. The M0 Foundation is established and domiciled in Switzerland, and guided by the M0 Foundation Council.