MUSD Fees & Costs

Fee Summary

Fee	Amount	When Charged
Issuance fee	0.1% of borrowed MUSD	Opening or increasing a loan
Interest	1–5% APR (fixed at open)	Accrues on outstanding debt
Redemption fee	0.75%	Exchanging MUSD for BTC collateral
Refinance fee	0.02% of debt	Refinancing a loan to a new rate
Gas deposit	200 MUSD (flat)	Opening a loan (returned on close)

Fee Distribution

Note

Fees are split between two destinations: (1) repaying the protocol bootstrap loan and (2) the MUSD Savings Vault. The initial split is 50/50 and is governable via the MUSD splitter. A minimum of 50% of fees must go toward loan repayment until the bootstrap loan is fully repaid. After repayment, all fees flow to the Savings Vault.

Interest Fees (1–5% APR)

Interest on MUSD loans is fixed for the life of the loan. When credit is increased, the new credit will be added at the current interest rate.

At launch, interest fees fund the MUSD treasury stability pool, which covers liquidations and bad debt.

Redemption Fees (0.75%)

A 0.75% fee withheld from the BTC a redeemer receives when they exchange MUSD for collateral during redemption. It is paid by the redeemer, not by the borrower whose loan is redeemed against.

At launch, redemption fees fund the MUSD treasury stability pool, which covers liquidations and bad debt.

Issuance Fee (0.1%)

The issuance fee is paid when an MUSD loan is opened or when a loan holder borrows more MUSD. The fee is 0.1% of borrowed amount and is paid in MUSD. A $10,000 MUSD loan would pay a $10 issuance fee in MUSD. If you increase your loan, you pay the issuance fee on the newly borrowed MUSD.

Refinance Fee (0.02% of debt)

The refinance fee is incurred when a MUSD loan holder requests to update the loan’s interest rate. The borrower may want to refinance their loan if the interest rate offered for new loans is better than the fixed interest rate on the user’s loan. Refinancing allows to update the loan’s rate to the new rate. Each refinance request incurs a refinance fee of 0.02% of the debt and is paid in MUSD.

Gas Deposit (200 MUSD flat fee)

A 200 MUSD deposit ensures that liquidations are viable. It is returned when the loan is closed. The gas deposit is minted as extra debt in the loan and held in escrow until the loan is closed. This debt counts towards calculating the collateralization ratio.

Other Gas & Transaction Fees

Users interacting with the MUSD system will have to pay transaction fees for each transaction broadcasted to Mezo Network. This includes actions such as minting, redeeming, staking, and claiming.

Risks to Know

Caution

Borrowing MUSD carries risk. Understanding these risks helps you protect your position.

Redemption risk — To maintain the MUSD peg, the protocol can redeem MUSD against collateral, starting with the loans that have the lowest collateral ratio (but are still above the 110% liquidation threshold). If your loan is redeemed against, you lose exposure to BTC price upside and may face tax implications. To reduce this risk, keep your collateral ratio higher than other borrowers.

Liquidation risk — If your loan’s collateral ratio falls below 110%, your position can be liquidated. You lose your collateral and keep the borrowed MUSD. To reduce this risk, monitor your loan regularly and add collateral when needed. For full details, see MUSD Liquidations & Redemptions.