Mento's Ambition: From Stablecoin to Global Forex Infrastructure, a Late On-Chain Financial Revolution

Written by: White55, Mars Finance

After completing a stunning transformation to Ethereum L2 on Celo and integrating into the Superchain ecosystem, Mento, the largest stablecoin platform in its ecosystem, is quietly redefining its positioning. This protocol, which once focused on issuing localized stablecoins for emerging markets (such as Brazil's cREAL, Kenya's cKES, Colombia's cCOP, and the Philippines' PUSO), is now using cross-chain expansion as a springboard, aiming for the trillion-dollar on-chain foreign exchange market. Through the cross-chain protocol Wormhole, Mento plans to deploy its 15 issued fiat stablecoins (covering USD, EUR, JPY, South African Rand, etc.) to high-throughput public chains like Solana and Base, and build a DEX and liquidity pools that support multi-currency trading, attempting to become the on-chain infrastructure connecting global currency systems.

The underlying architecture of the on-chain foreign exchange network: Mento's technical roadmap and multi-chain ambition

Mento's core strategy is to use the cross-chain bridge Wormhole as its vascular network, delivering 15 fiat stablecoin assets such as USD, EUR, and JPY, which support minting and redemption on its platform, to emerging public chains like Solana and Base that feature high throughput and low transaction costs. This deployment is by no means a simple asset replication; rather, it constructs a foundational layer of cross-chain and cross-currency liquidity. On the technical side, Mento is built on a stablecoin protocol supported by its custom automated market maker (AMM) curves. Its uniqueness lies in the fact that users can mint any of the supported fiat-pegged stablecoins using a basket of over-collateralized asset combinations composed of CELO (as well as cUSD, cEUR, etc. from historical mechanisms) or other on-chain assets like ETH and BTC.

The crucial aspect is its 200% over-collateralization mechanism design. This collateral rate requirement, which is significantly higher than the common levels in the industry (such as MakerDAO's stable fee rate and liquidation line design), constitutes the core reason for the current liquidity depth difference in Mento. Although the high collateral requirement greatly enhances the safety margin of a single fiat currency token during price fluctuations or black swan events, ensuring it can maintain a strict 1:1 fiat anchor, it also significantly raises the cost for arbitrageurs to participate in minting new assets and balancing cross-pool exchange rates. The compression of arbitrage opportunities directly leads to insufficient trading pool depth for currencies other than the US dollar and euro (which typically have larger and deeper collateral pools and more active market supply and demand), creating the current reality where "the US dollar and euro are as deep as the sea, while other currencies are shallow and narrow." This largely restricts the feasibility of small-scale high-frequency trading, making it difficult to match real commercial settlement needs.

The Prisoner's Dilemma of Security and Liquidity: The Double-Edged Sword of 200% Collateralization Rate

A deep analysis of the core contradictions of the Mento mechanism—the 200% collateralization rate setting—is the key to understanding its current state and future potential. This solid "safety shield" is forged from multiple considerations: first, it addresses the highly complex exchange rate volatility risks hidden behind a diversified basket of fiat currencies. Unlike a single dollar stablecoin that only needs to monitor the U.S. dollar index, the Mento system must dynamically withstand significant relative price fluctuations among more than a dozen fiat currencies. High collateral acts as a heavy cushion. Secondly, the value volatility of the collateral itself cannot be ignored. When users use native crypto assets like Ethereum, Bitcoin, or even CELO tokens as collateral, the high volatility of these assets constitutes a source of systemic risk. The 200% requirement aims to leave ample room for the value of the collateral to drop, avoiding frequent liquidation storms that could impact the stability of the system.

However, the safe side comes at a cost. A high collateralization rate effectively locks up a large amount of capital, which means a huge opportunity cost in the DeFi space where capital efficiency is a lifeline. Participants must invest qualified assets worth double or even more than the minting value (considering that the collateral itself may also have volatility requirements) when choosing to mint non-mainstream fiat stablecoins (for example, if they want to mint a Singapore dollar stablecoin for a small trade settlement in Singapore). This not only greatly suppresses the willingness of ordinary users to participate but also puts a harsh test on the profit model of professional arbitrage institutions. When the potential arbitrage profit from exchange rate differences cannot cover the high collateral costs and potential risks (such as collateral dropping triggering liquidation), funds will naturally not flow into non-mainstream trading pairs in large scale, which directly explains why currencies like the Japanese yen, New Taiwan dollar, and Hong Kong dollar, although already launched, still mainly cater to small transactions.

Regional barriers and misalignment of hard demand: The Asian market yearns for on-chain "infrastructure"

Mento's publicly available fiat deposit and withdrawal channels clearly delineate the geographical boundaries of its services in the real world: focusing on the USD zone and the Euro zone. This is certainly highly correlated with the maturity of regulations, the development of traditional financial payment infrastructure, and the early distribution of stablecoin users. However, the result is a significant mismatch between a potentially high-demand market—Asia—and its current service capabilities.

The economic pulse of Asia, particularly in East Asia and Southeast Asia, is inherently characterized by a high frequency, volume, and diversity of fiat currency exchange demands, as it is closely embedded in the global manufacturing, commodity trading, and technology supply chains. The international financial hub status of Hong Kong and Singapore, the technology-intensive export-oriented economies of Japan and South Korea, as well as the intricate cross-border trade settlements within the Association of Southeast Asian Nations (ASEAN), all call for a cross-currency trading platform that operates 24/7 with lower costs and greater efficiency and transparency. The cumbersome traditional foreign exchange remittance processes, high fees, and poor timeliness (often requiring T+1 or even longer) are the pain points that protocols like Mento aim to eradicate. However, there is currently a lack of efficient, compliant, and deeply covered channels for fiat currency inflow and outflow in major Asian currencies (excluding the Japanese Yen), as well as insufficient depth in non-mainstream trading pairs, which severely restricts its application in scenarios such as cross-border payments for large and small enterprises in Asia, cross-border payment of wages in the gig economy, fund management for frequent travelers, and the increasing operational expenses of blockchain-native projects across multiple countries. Mento's grand vision urgently needs to find key strategic footholds in the Asian region.

Signals of Industry Transformation Amidst the Surge of On-chain Assets: Mento is Not an Isolated Case

Mento's strategic upgrade is not an isolated phenomenon but a key chapter embedded in the grand narrative of "Real World Asset (RWA) on the chain" surging towards 2025. The current market is witnessing an epic migration: from the approval of the historically significant Bitcoin spot ETF attracting capital, to mainstream investment institutions continuously increasing their allocation to tokenized U.S. Treasury products (such as BlackRock's BUIDL fund exceeding $500 million), and to various countries actively exploring the cross-chain interoperability blueprint for Central Bank Digital Currencies (CBDCs). Traditional financial giants (such as Goldman Sachs) are actively laying out platforms for trading tokenized private equity funds, and even the chairman of the New York Stock Exchange has publicly supported the vision of on-chain trading settlement. Foundational financial assets—stocks, debt instruments backed by sovereign credit (government bonds), and currency exchange that constructs the capillaries of the global economy—are accelerating their migration onto the chain.

In this grand context, next-generation public chains like Celo and Stellar Lumens (XLM), which have championed "payment inclusivity," along with their leading applications (such as Mento), face severe challenges in transforming their growth momentum. Purely low-cost cross-border USD payments have long been squeezed out of the market by emerging Rollup networks and optimized stablecoin (such as USDC, PYUSD) channels. Transformation is not a matter of choice, but a matter of survival. Mento focuses on diverse fiat currency exchanges, essentially upgrading its protocol capabilities from a mere "USD settlement tool" to a "foundational on-chain foreign exchange infrastructure" that supports complex multilateral economic activities.

This transformation direction is forming an industry consensus. We see Ripple continuously deepening its On-Demand Liquidity (ODL) solutions, seeking to connect more fiat corridors (especially in Southeast Asian countries); although Circle is centered around USDC, its Cross-Chain Transfer Protocol (CCTP) and collaboration network also imply a more convenient exploration of multi-currency conversion pathways; even MakerDAO is gradually absorbing more real-world asset collateral (such as U.S. Treasury bonds), and its large DAI stablecoin reserve theoretically could support a wider range of on-chain multi-currency application scenarios in the future. Mento is not the only player seeing the opportunity; its "on-chain foreign exchange Lego" practice provides the entire industry with a radical yet highly referential transformation model.

The road ahead is fraught with challenges, and the window of opportunity is opening.

The blueprint for Mento to build a global on-chain foreign exchange market is undoubtedly exciting, yet the numerous obstacles it faces cannot be ignored. A 200% collateral lock requires the design of more sophisticated risk hedging mechanisms (such as introducing on-chain foreign exchange derivatives to hedge against exchange rate volatility) or exploring partially legal and compliant off-chain custodial assets as supplementary sources of collateral, in order to gradually reduce the constraints on capital efficiency while ensuring security. The regulatory net is tightening from all sides, with multiple countries targeting stablecoins (especially non-US dollar stablecoins) and DeFi protocols like Mento that connect various fiat currencies. The compliance status (is it a payment tool, foreign exchange broker, or money transfer service?), the boundaries of anti-money laundering/combating the financing of terrorism (AML/CFT) obligations, capital requirements, and how they align with existing foreign exchange management frameworks are all fraught with significant uncertainty. Especially in different jurisdictions in Asia, regulatory standards vary greatly, making it crucial to seek limited pilot licenses in key regions.

More importantly, it is the gap in user experience. To seamlessly integrate multi-currency exchanges on-chain into the real payment settlement flows of businesses or individuals, it is necessary to address complex tax reporting issues (does converting between different currencies trigger capital gains tax?), easy fiat currency acceptance for merchants (how can merchants receive and settle in their local fiat currency with one click?), and extremely user-friendly deposit and withdrawal interfaces aimed at non-crypto professionals (such as compliant access to local bank cards and popular e-wallets), among other challenges. The ultimate success of the protocol will ultimately depend on whether it can become an irreplaceable "infrastructure" in the settlement chain of real economic activities. In fierce competition, liquidity depth is the moat, and user experience stickiness is the lifeline. The current situation is that the lack of depth in non-mainstream currencies has become Mento's biggest shortcoming. How to attract real users (including market makers) with genuine trading demand to enter the market and be willing to deposit funds and establish trading habits on the platform will be the fortress that must be conquered to move from "technically feasible" to "commercially viable."