MELI DÓLAR TERMS AND CONDITIONS OF USE
These terms and conditions (hereinafter, the "MUSD Terms and Conditions") regulate the receipt, holding, transfer, purchase and sale of Meli Dólar, a U.S. dollar denominated stablecoin built on the Ethereum and Polygon Networks ("MUSD").
By receiving, holding, transferring, or otherwise transacting with MUSD, you expressly understand and accept these MUSD Terms and Conditions, and you acknowledge that you have reviewed and understand each and every statement set forth herein. These MUSD Terms and Conditions are entered into among you, Meli ISAC Ltd. ("Meli ISAC") and Meli ISA Ltd. ("Meli ISA").
Acknowledgement of risk
As a MUSD holder, you acknowledge that using crypto-assets and blockchain-based solutions, networks and protocols may involve certain risks. You further acknowledge and accept that the market price of MUSD may not always be equal to 1 (one) U.S. dollar on other platforms different from the Meli Platforms (defined below) and could fluctuate above or below 1 (one) U.S. dollar on those platforms. Although MUSD is always redeemable for 1 (one) U.S. dollar by Meli ISAC (minus applicable fees, and subject to the minimum redemption amount and compliance with the procedures described in Section 4.2. below), Meli ISAC is not responsible for any losses and does not assume any obligation in relation to the market price of MUSD on other platforms different from the Meli Platforms. Additionally, as an MUSD holder, you acknowledge and accept that MUSD is not, nor does Meli ISAC intend it to be, an investment opportunity of any kind and that it should not be perceived as such. MUSD is not, and should not be treated as, a "security" in any jurisdiction.
1. Meli Dólar: U.S. Dollar Denominated Stablecoin
1.1 Definition
Meli Dólar (MUSD) is a U.S. dollar denominated stablecoin issued by Meli ISAC. Meli ISAC is a Bermudan incorporated segregated account company (ISAC) incorporated pursuant to the Incorporated Segregated Accounts Companies Act 2019, registered and licensed by the Bermuda Monetary Authority (the "BMA") to conduct digital asset business under the Digital Asset Business Act. Each MUSD will be redeemable for a value of 1 (one) U.S. dollar as further described in Section 1.3. and subject to the limitations set forth therein. In order to issue 1 (one) MUSD, a corresponding 1 (one) U.S. dollar (or an equivalent U.S. dollar value of U.S. dollar-denominated assets) is held in the MUSD Reserves (defined below). MUSD tokens are not money or legal tender and are not monetary instruments.
1.2 Reserves
MUSD is fully backed by an equivalent U.S. dollar value of U.S. dollar-denominated assets (the "Reserve Assets") held by Meli ISAC in an incorporated segregated account (Meli ISA) which, pursuant to Bermuda law, is a separate and distinct account of an incorporated segregated account company (ISAC), with legal personality. Meli ISA will hold the Reserve Assets exclusively for the benefit of MUSD holders with (1) registered U.S. broker-dealers and/or (2) U.S. depository institutions, each in accounts established for the benefit of MUSD holders. This means that for every MUSD issued and put into circulation by Meli ISAC, the company, through Meli ISA, will hold an equivalent U.S. dollar value – one-to-one ratio – of U.S. dollar-denominated assets (the "MUSD Reserves"). For the avoidance of doubt, the MUSD are held by Meli ISA fully segregated from Meli ISAC's operating accounts, and thus bankruptcy remote. These Reserve Assets may include cash deposits, deposits in interest-bearing accounts, short-term U.S. Treasury bonds, investments in money market mutual funds containing short-term U.S. Treasury or U.S. government agency bonds, repurchase agreements of short-term U.S. Treasury or U.S. government agency bonds, and fully backed U.S. dollar-denominated stablecoins. As an entity regulated by the BMA, Meli ISAC will comply with the BMA's guidelines regarding backing assets. Meli ISAC reserves the right to hold the Reserves Assets as it sees fit, at its discretion, always in conformity with BMA's guidelines.
1.3 Redemption. Contractual Obligation
Meli ISAC (but no other member of the Mercado Libre Group (defined below)) commits to redeem 1 (one) MUSD for 1 (one) U.S. dollar subject to the fees set forth in Section 4.3., and subject to the minimum redemption amount and compliance with the procedures described in Section 4.2. below.
1.4 Returns
MUSD is not designed to create returns for holders, increase in value, or otherwise accrue financial benefit to the MUSD holders, and only represents to the MUSD holder a right to redeem such MUSD for an equivalent amount of U.S. dollars, minus applicable fees (as set forth in Section 4.3. below), subject to the minimum redemption amount and compliance with the procedures described in Section 4.2. below. While Meli ISAC, through Meli ISA, may hold the MUSD Reserves in interest-bearing accounts or other yield-generating instruments, each MUSD holder acknowledges that it is not entitled to any interest or other returns earned on such funds. Any interest or returns generated by Meli ISA on the MUSD Reserves may accrue to, and be retained by, Meli ISAC pursuant to the terms of an agreement between Meli ISAC and Meli ISA.
2. Limitation of Liability; Suspension and Termination
2.1 Amendment and Termination
MUSD holders acknowledge that Meli ISAC may cancel, suspend or change the issuance of MUSD at any time, except as provided in Section 4. Meli ISAC will not be liable for cancellation, suspension or modification of the issuance of MUSD, nor be liable for fluctuations of the market price of MUSD on other platforms. Meli ISAC reserves the right to change these MUSD Terms and Conditions without notice.
2.2 Limits to Liability
Neither Meli ISAC nor its affiliates, nor its directors, representatives and/or shareholders, shall be liable to the holders of MUSD and/or third parties, for any loss, damage, claim, cost and/or expense that may arise directly or indirectly from: (i) any failure or delay related to causes beyond the reasonable control of Meli ISAC, including, among others, communication failures; acts of third parties; problems or failures of any third-party software, service or hardware; terrorist acts; market interruptions; war; riots; violence; acts of God; or government action or inaction; (ii) any delay in redemption of MUSD from Meli ISAC, (iii) the inability of any party to, in Meli ISAC's discretion, meet the eligibility requirements for redeeming under Section 4.2. below and any delay or inability to transact that may cause; or (iv) any other circumstances arising out of or in connection with MUSD or services provided pursuant thereto, whether under contract, tort (including negligence), civil liability, statute, strict liability in an amount exceeding fees paid by the applicable MUSD holder. Neither Meli ISAC nor its affiliates, directors, representatives and/or shareholders shall be liable for any incidental, indirect, special, punitive, consequential or similar damages or liabilities whatsoever (including, without limitation, damages for loss of fiat currency, assets, data, information, revenue, opportunities, use, goodwill, profits or other business or financial benefit) arising out of or in connection with MUSD or services provided pursuant thereto.
2.3 Additional Limitations
Neither Meli ISAC nor its affiliates, controllers and/or subsidiaries, expressly or implicitly, in whole or in part, guarantee: the normal and proper functioning of any third-party system or protocol that may be used to support the MUSD; the liquidity over time of the MUSD; the development of a market for MUSD, the acceptance by MUSD on any exchange or similar platform, or the availability of third-party buyers for MUSD; the amount of time under which a transaction may hold a price; the immutability and/or security of the blockchain or the technology underlying the MUSD or any wallet; the availability of the technology that accompanies the issuance of MUSD, including the lack of any error, virus, bug, dysfunction or any attempt to compromise with the security or integrity of any such technology; or that any data or information related to any digital asset will be safe against loss, corruption or theft during transmission over the internet or any other network.
3. Holders
3.1 Holders
By receiving, holding, transferring, or otherwise transacting with MUSD, each user is deemed to, and does, accept these MUSD Terms and Conditions.
3.2 Restricted Persons
A list of Restricted Locations is set out at Section 6.1. below. By receiving, holding, transferring, or otherwise transacting with MUSD, each user is deemed to represent and warrant that it is not the subject of any sanctions or located in a Restricted Location (a "Restricted Person") nor are holding MUSD on behalf of a Restricted Person.
3.3 Representations and Warranties
By receiving, holding, transferring, or otherwise transacting with MUSD, each user is deemed to represent and warrant that: (i) if a legal entity, it is duly organised, validly existing, and in good standing under the laws of its jurisdiction of organization; or if a natural person, that they are competent to enter into these MUSD Terms and Conditions (ii) it has all necessary power and authority to enter into transactions with MUSD, to carry out obligations hereunder, and to consummate the transactions contemplated hereby, and (iii) the performance of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorised by all requisite corporate or organizational action on the part of the entity.
3.4 No Conflicts
Neither the acknowledgment of these MUSD Terms and Conditions nor the consummation of any transaction contemplated hereby does or will conflict with, violate, or constitute a default under: (i) any of your organisational documents, (ii) any applicable law, statute, regulation, rule, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which you are subject or by which any of your assets or properties are bound, or (iii) any agreement, debt, or instrument to which you are a party or by which any of your assets or properties are bound.
3.5 Prohibited Activities
As a MUSD holder, you acknowledge and agree that, in relation to your use of MUSD, you will not engage, nor be involved in any other way, in any prohibited activity (i.e. any activity that violates any applicable law, rule or regulation), including, but not limited to, money laundering, terrorism financing, fraud, misrepresentation, market manipulation (including if such conduct is through third party cryptocurrency trading platforms, exchanges and/or wallets) or sanctions. In the event of any prohibited activity, Meli ISAC may (1) blacklist any MUSD holder's related address and/or (2) consequently freeze any MUSD holder's MUSD.
4. Redemption
4.1 No warranty; Commitment
Meli ISAC does not guarantee that MUSD will be sold, purchased or accepted by any third party. However, Meli ISAC commits to redeem 1 (one) MUSD for 1 (one) U.S. dollar, subject to any applicable fees as set out in Section 4.3. and compliance with the conditions set out in Section 4.2.
4.2 Redemption against Meli ISAC
In order to redeem MUSD directly against Meli ISAC, MUSD holders must first send an email to musd_redemption@mercadolibre.com and complete the registration and know your client (KYC) and location verification processes ("Registered MUSD Holders"). MUSD holders who do not comply with these conditions, or are engaged or involved in any other way in any prohibited activity, will not be eligible to redeem MUSD directly against Meli ISAC. Once the registration and corresponding identity verification processes are completed, the Registered MUSD Holder will be able to initiate the process of redeeming MUSD directly against Meli ISAC by submitting a redemption request by email to the above e-mail address with the following information: (i) address from which the MUSD is being redeemed, (ii) the amount of MUSD to be redeemed, which shall be equal to or greater than the required minimum redemption amount, and (iii) details of the Registered MUSD Holder's U.S. dollar-denominated bank account to which Meli ISAC shall transmit fiat funds resulting from the redemption, including bank account number, ABA/SWIFT number, bank name, bank address, and account name (which must be in the name of the Registered MUSD Holder). The minimum redemption amount for any Registered MUSD Holder is $100 (one hundred U.S. dollars) equivalent amount of MUSD. Subject to the conditions established herein, a Registered MUSD Holder's redemption request will be processed within 5 (five) business days. The Registered MUSD Holder will receive 1 (one) U.S. dollar for 1 (one) MUSD, minus all incurred fees as set out below.
4.3 Fees
Direct redemption against Meli ISAC will include a fixed fee of USD 30 (thirty U.S. dollars), for administrative costs associated with the execution of the transaction, which will be deducted from the total amount to be redeemed.
5. Data Privacy
Registered MUSD Holders acknowledge that their personal data will be processed by Meli ISAC pursuant to its Privacy and Confidentiality Policy, for the purposes of accomplishing the purposes described in these MUSD Terms and Conditions and the Privacy and Confidentiality Policy.
6. General Provisions
6.1 Restricted Locations
The following jurisdictions are deemed by Meli ISAC as "Restricted Locations", i.e., jurisdictions where Meli ISAC, in its sole discretion, currently prohibits MUSD transactions: Cuba, Iran, North Korea, Syria and the Crimea, Donetsk and Luhansk Regions of Ukraine. Meli ISAC may amend this list from time to time without notice. MUSD holders must not attempt to use MUSD if they are located in any of the Restricted Locations. MUSD holders must not attempt to circumvent any restrictions imposed by Meli ISAC, such as by obscuring an IP address or submitting any inaccurate location information. Meli ISAC reserves the right to blacklist a specific address at any time and freeze any MUSD owned by a person located in any of the Restricted Locations.
6.2 Unverified Users; Release
Meli ISAC is not liable to a holder of MUSD who has failed to meet the Registered MUSD Holder requirements in Section 4.2. (an "Unverified User"). Meli ISAC is not liable to any third party cryptocurrency trading platform, exchange and/or wallet that supports and/or lists MUSD or to any MUSD holder that incurs any costs or losses by using such third party. MUSD holders also agree and understand that neither Meli ISAC nor any of its third-party service providers are, nor may they be made, a party to any dispute related to or involving an Unverified User using MUSD or a third party cryptocurrency trading platform, exchange and/or wallet supporting MUSD. Users also agree and understand that neither Meli ISAC nor any of its third-party service providers are responsible for the use (or misuse) of MUSD on the Ethereum and Polygon Networks or otherwise, and that they may not make Meli ISAC or its third-party service providers party to any dispute involving the use (or misuse) of MUSD on the Ethereum and Polygon Networks or otherwise.
6.3 Token protection and Blacklisting Capability
Meli ISAC has the ability to blacklist any specific address and consequently freeze the MUSD thereunder, regardless of where the MUSD is being held. If any applicable law or these MUSD Terms and Conditions are violated, whether in whole or in part, or if required by law, including a court order or other legal process, Meli ISAC may blacklist the specific address of any non-compliant MUSD holder, including persons located in any of the Restricted Locations, and consequently freeze the MUSDs thereunder. In those circumstances, Meli ISAC may block and unblock the corresponding address on the blockchain. Blacklisted addresses will be blocked from receiving and/or sending MUSD.
6.4 IP Rights
"Meli Dólar", "Mercado Pago", "Mercado Libre", and all logos associated with MUSD are either trademarks or registered trademarks of the Mercado Libre Group. You may not copy, reproduce, imitate, or otherwise use any of these marks without the prior consent of Meli ISAC.
6.5 Indemnity
You agree to indemnify, defend, and hold harmless Meli ISAC, Meli ISA, their affiliates and service providers, and each of their respective officers, directors, agents, joint venturers, employees and representatives from and against any claim, demands, losses, damages (including those resulting from actions by any regulatory authority), liabilities and expenses (including attorney's fees) arising out of or related to your breach of these MUSD Terms and Conditions, your violation of any applicable law or regulation, or your holding or use of MUSD.
6.6 Taxes
MUSD holders are solely responsible for determining whether any transaction contemplated by these MUSD Terms and Conditions or their related operations with MUSD will give rise to any tax implications. MUSD holders are solely responsible for reporting and/or paying any and all taxes which they may be liable to the relevant tax authorities. Meli ISAC shall not be responsible for withholding, collecting, reporting or paying any taxes which may arise from any activity contemplated by these MUSD Terms and Conditions.
6.7 Jurisdiction and Applicable Law
These MUSD Terms and Conditions shall be governed by, construed and enforced in accordance with the laws of Bermuda. For all matters concerning the interpretation, compliance or any other questions related to these MUSD Terms and Conditions, MUSD holders agree to submit to the exclusive jurisdiction of the courts of Bermuda, except for complaints submitted by MUSD holders in a jurisdiction where the jurisdiction is a matter of public order that cannot be waived by the parties, who, in such cases, may refer such claims to their local court.
6.8 Mercado Libre Group
The Mercado Libre Group consists of MercadoLibre, Inc. and its subsidiaries and affiliates (together, the "Mercado Libre Group"). MUSD shall represent a performance obligation only of Meli ISAC Ltd. and Meli ISA Ltd., and not of any other Mercado Libre Group member.
7. Contact Information
MUSD holders may contact Meli ISAC through email: info@melidolar.co for any questions or concerns regarding these MUSD Terms and Conditions.
RISKS ASSOCIATED WITH THE USE OF MUSD
MUSD holders shall acknowledge that using digital assets and blockchain-based solutions, networks and protocols may involve certain risks, including:
Depegging risk:
The market price of MUSD may not always be equal to 1 (one) U.S. dollar on other platforms different from the Meli Platforms and could fluctuate above or below 1 (one) U.S. dollar. MUSD holders acknowledge and accept that, although MUSD is always redeemable by Meli ISAC for 1 (one) U.S. dollar, minus applicable fees (if any) and subject to a minimum redemption amount, members of the Mercado Libre Group are not responsible for any losses and do not assume any obligation in relation to the market price of MUSD on other platforms different from the Meli Platforms.
Liquidity risks:
MUSD may not be liquid at all times. The actions taken by Meli ISAC might not be effective in order to provide the liquidity needed for MUSD's use cases, maintain price stability of MUSD and facilitate adequate flow of MUSD for its intended use cases.
Transfer risks:
MUSD might not always be transferable. MUSD is designed to be able to be sold or transferred. In addition, MUSD is designed to be able to be designated for use by users of the Mercado Pago payments platform and Mercado Libre's e-commerce platform (the "Meli Platforms") in a purchase of goods or services on the Mercado Libre's e-commerce platform, with such designation resulting in a sale of MUSD and use of proceeds to conclude the purchase on the Mercado Libre's e-commerce platform. However, the Mercado Libre Group does not guarantee that MUSD will be sold, purchased or accepted by any third party or by one or more of the members of the Mercado Libre Group, other than Meli ISAC which commits to redeem 1 (one) MUSD for 1 (one) U.S. dollar, subject to any applicable fees and subject to a minimum redemption amount. Transactions involving the transfer of cryptocurrencies and digital assets are not reversible. Once sent to another wallet or address, users of MUSD tokens may lose all access to and claims upon, the relevant digital assets and associated rights immediately. Potential scenarios include (i) incorrect address, including where the identity of the owner of the address may never be known or the owner refuses to transfer any digital asset sent in error or requires action on the part of the sender, such as verification of identity; and (ii) loss of private keys associated with such address. Meli ISAC shall employ multi-layer wallet and key management processes including storage and safekeeping of private keys, effectuation of digital asset transfers and transaction authorisation policies (including where applicable using third party services) however which may fail or be subject to interference or compromise. For the avoidance of doubt, the Mercado Libre Group shall not be under any obligation to track, verify or determine the provenance of any MUSD tokens, when transferred or otherwise.
Counterparty risk and third party platforms:
The MUSD tokens are constituted using open source software and using decentralised distributed ledgers. As a result, third party platforms may support such tokens without any authorisation or approval from the Mercado Libre Group. In addition users may be exposed to operational risk of any third party which transacts in the MUSD tokens or is involved in any process in respect of the issuance, securing or transacting in such digital assets (including applicable private keys and any wallet provider services). The Mercado Libre Group does not represent that any such third party service which supports either token is valid, legal or otherwise enforceable, nor will the Mercado Libre Group be liable for any other losses incurred pursuant to the support or use of MUSD tokens by third party platforms.
Protocol, smart contract and operational risks:
The MUSD tokens rely on the operation of the applicable protocols, smart contracts, key management and wallet operational layer which may fail or be subject to unauthorised access, disruption or misuse (of the system or information stored on such system), a breach of security, loss, destruction or unauthorised disclosure of such relevant information as well as a compromise of the integrity of the applicable system or data or otherwise as well as any event which has occurred for which notice is required to be provided to a regulatory body or a government agency which may result in unintended or adverse outcomes and/or which may be exploited by hackers. While Meli ISAC may employ qualified professionals to conduct audits of code where applicable, the failure of any code may result in unanticipated losses.
Risks in respect of illegal activity:
Meli ISAC reserves the right to restrict or block transactions involving MUSD tokens involving any such applicable wallets or addresses that it determines, in its sole discretion, are associated with any illegal activity or activity which violates these MUSD Terms and Conditions. In such circumstances Meli ISAC may freeze such digital assets held and/or terminate any applicable account. Meli ISAC may also report any suspected illegal activity to any governmental authorities and any rights of redemption may also be forfeited. Meli ISAC may also take such steps pursuant to the order of any governmental authority. The Mercado Libre Group may also restrict transfers of MUSD to or from any wallet or address pursuant to the application of any policy for restricting activity or "blacklisting" in accordance with any such policy published by the Meli ISAC, including in the event of any risk to the security, integrity, reliability of any of the systems owned or operated by Meli ISAC.
Regulatory risks:
The regulation of stablecoins such as MUSD is in a nascent stage of development around the world. New regulations or policies may come into effect. These regulatory changes are impossible to predict, so there is high uncertainty with regard to their impact on how stablecoins and token-related activities are to be treated.
Security risks:
The use of tokens such as MUSD poses risks of account takeovers, hacking, or other fraudulent practices. MUSD holders are advised to use security measures such as double factor authentication and strong password policies among other recommendations.
Termination risks:
The risk of not being able to use the MUSD according to the use cases due to failure or discontinuation of the project.
Operational and Cyber Risks:
The Mercado Libre Group and its services may be the subject of cyber attacks or other operational or technical difficulties that may cause delays to services of Meli ISAC, including to the redemption of any MUSD. To the extent losses result from such operational or technical difficulties, none of the companies within the Mercado Libre Group shall be liable for any such losses occurring.
Deposit Protection:
The MUSD tokens and other instruments issued by Meli ISAC are not protected by any deposit insurance, government savings or deposit protection scheme. However, fiat currency reserves will benefit from the U.S. FDIC deposit insurance.
Compliance with Applicable law:
The holder is solely responsible for complying with applicable law in respect of the MUSD tokens and services offered by the Mercado Libre Group, including tax laws and applicable tax reporting obligations. The Mercado Libre Group shall have no obligation to determine the applicability of any tax laws. Laws applicable to cryptocurrencies and digital assets in many jurisdictions are unclear or unsettled. It is difficult to predict how regulatory authorities may apply any law or regulation in respect of any contemplated transactions involving MUSD or applicable cryptocurrencies or digital assets. Laws and regulations applicable to the MUSD tokens and services offered by the Mercado Libre Group may change which may adversely affect the user and the offering of any such services.
Status of cryptoassets and underlying collateral rights:
MUSD Reserves shall comprise fiat currency, cash deposits, deposits in interest-bearing accounts, short-term U.S. Treasury bonds, investments in money market mutual funds containing short-term U.S. Treasury bonds, short-term U.S. government agency bonds, repurchase agreements of short-term U.S. Treasury or U.S. government agency bonds held in certain deposit and/or investment accounts, and fully backed U.S. dollar-denominated stablecoins. In respect of the manner in which the MUSD Reserves will be held, see Description of Arrangements to Safeguard the MUSD Reserves. While the Mercado Libre Group will give timely and updated disclosures of the MUSD Reserves, there is no certainty any user will be able to redeem or take delivery of reserve assets on a same day basis (due to procedures delivery upon exercise of any rights in respect of redemption of any MUSD tokens in accordance with the applicable terms and conditions). Issue or transfers of any cryptoassets or digital assets issued by the Mercado Libre Group may not be valid, binding or enforceable in certain jurisdictions and may become the object of a security interest prior to redemption or otherwise. Transfers of any such cryptoassets or digital assets are irreversible. Meli ISAC may not have the ability to reverse any transfer and any user may be subject to losses that may be incurred from sending any such cryptoasset or digital asset to an incorrect or unintended address or wallet.
RISKS IN RESPECT OF UNDERLYING COLLATERAL
In respect of the MUSD Reserves certain risks shall be applicable, including:
Currency Risk:
Changes in currency exchange rates may unfavourably affect the value of the MUSD tokens (including by virtue of the MUSD minting process), relative to other currencies.
Custody of MUSD Reserves:
MUSD Reserves shall be deposited with and held for safekeeping by such banks, custodians and financial institutions as notified by Meli ISAC ("MUSD Deposit Institutions"), including in the manner described in the section entitled Description of Arrangements to Safeguard the MUSD Reserves. These deposits are intended to be held at institutions insured by the FDIC or other applicable deposit insurance schemes, which may provide protection up to the applicable coverage limits. However, in the event of insolvency or financial distress of the MUSD Deposit Institutions, there is no certainty that holders of MUSD tokens will recover funds equal to the value of their MUSD token holdings or the applicable MUSD Reserves, particularly for amounts exceeding insurance limits.
Audits and attestations:
Professional audits and attestations will be obtained in respect of the MUSD Reserves and will be updated and published by the Mercado Libre Group, however these may not be accurate or may suffer from defects arising from the auditor or other firm involved and the audit or attestation methods. Audits and attestations are subjective and can be uncertain, including as they are made subject to certain assumptions which may not prove accurate and because of the individual nature of each particular property. There can be no assurance that any audit report attestation or similar estimates resulting from the audit or attestation process will reflect actual valuations that could be realised by any owner of such property in the future.
Limitations on enforcement:
Other than in respect of the rights of direct enforcement described in the section entitled Description of Arrangements to Safeguard the MUSD Reserves, holders of MUSD tokens shall not be necessarily entitled to directly enforce certain rights in respect of the MUSD Reserves against the applicable Mercado Libre Group affiliate. Prospective users should note that there are limitations on enforcement against Meli ISAC and that the proceeds of enforcement may not be sufficient to make all payments due to any applicable holder of MUSD.
DESCRIPTION OF ARRANGEMENTS TO SAFEGUARD THE MUSD RESERVES
Rights of MUSD holders
Relationship of MUSD holders with the Issuer and the Depositary – MUSD holders enforcement rights against the Issuer and the Depositary. The rights of MUSD holders against Meli ISAC are governed by the Meli Dólar Terms and Conditions of Use, which, for holders transacting outside the Mercado Libre Group's ecosystem, is governed by Bermuda law. For holders operating within the Mercado Libre Group ecosystem, the applicable rights and obligations are subject to the corresponding local laws of their respective jurisdictions. In addition, the MUSD holders (in respect of their holdings of particular MUSDs) will benefit from direct enforcement rights against the Depositary. Pursuant to the Reserves Management Agreement, on [date] the Issuer and the Depositary entered into a deed of covenant ("Deed of Covenant"), in which the Depositary covenanted that MUSD holders for which the applicable MUSD Reserves which are denominated in an applicable fiat currency shall, as a member of a class of MUSD holders for such MUSD Reserves denominated in the applicable MUSD reserves reference currency, automatically acquire all rights against the Depositary arising pursuant to the Reserves Management Agreement as if they were a party to it, in respect of the MUSDs of which they are a MUSD holder class member (the "Direct Enforcement Rights"). The Reserves Management Agreement, the Deed of Covenant and the Direct Enforcement Rights are governed by Bermuda law.
Relationship of MUSD holders with the Depositary
MUSD holders as Account Owner in respect of an incorporated segregated account (i.e. Depositary assets). In accordance with the Incorporated Segregated Accounts Companies Act 2019 (the "ISAC Act"), the Depositary shall maintain a register of account owners setting out their respective interests in assets of the Depositary as an incorporated segregated account (or ISA) (the "Depositary Register of Account Owners"). The Depositary Register of Account Owners shall refer to the MUSD holders as the account owner of the pool of assets and liabilities of the Depositary (comprising the ISA which is a separate and distinct account of the ISAC), which shall comprise chiefly, the MUSD deposited proceeds. Under the ISAC Act, assets of an ISA constitute a separate fund which is not part of the general account of the ISAC or the assets of any other ISA and shall be held exclusively for the benefit of the account owners (of the relevant ISA) and any counterparty to a transaction associated with that ISA and are available only to meet liabilities to the account owners and creditors of the ISA (and shall not be available or used to meet liabilities of the ISAC and creditors of the ISAC which are not creditors of the ISA). Therefore the holdings of the MUSD deposited proceeds shall be held exclusively for the benefit of the MUSD holders as account owner.
Holdings of MUSD deposited proceeds
Pursuant to the custodian agreements, the Depositary shall open and maintain accounts with the custodians in its own name for the benefit of the MUSD holders and thereto hold in such accounts all cash and fiat currency received by it from the issuance of MUSD to be held for the benefit of the respective account owners ("MUSD Custody Accounts"). MUSD holders will be able to obtain applicable balances of MUSD deposited proceeds by redeeming the applicable MUSDs in the manner specified in the Meli Dólar Terms and Conditions of Use and the Depositary shall, upon instruction from the Issuer or as otherwise applicable, transfer monies held in the MUSD Custody Accounts to the Meli ISAC for release to the redeeming MUSD holder. The Depositary may instruct the Custodians to undertake investment operations (including overnight deposits) in respect of the cash balances in the MUSD Custody Accounts, and the Depositary shall receive proceeds from such Custodians investments and record and safekeep any interest or other income earned on such MUSD Deposited Proceeds. MUSD holders will not be entitled to investment income, if any, generated by backing assets held in safekeeping.
Details of the Custodian Agreement
The Custodian Agreement is governed by [ ] law, and Meli ISAC and Depositary have agreed to submit to the jurisdiction of [ ] courts to settle any dispute arising out or in connection with the Custodian Agreement.
Replacement of the Depositary
Meli ISAC has broad rights to remove the Depositary under the terms of the Reserves Management Agreement.
Replacement of the Custodians
Both Meli ISAC and Meli ISA have broad rights to remove the custodians under the terms of the custodian agreements.
Default of Meli ISAC
If Meli ISAC fails to pay cash to MUSD holders in the circumstances required by the Meli Dólar Terms and Conditions or otherwise engages in a default for which it would be liable under the Meli Dólar Terms and Conditions, Meli ISAC will be in breach of its contractual obligations under the Meli Dólar Terms and Conditions. In such case, MUSD holders will have a claim under Bermuda law against Meli ISAC to the extent that Meli ISAC is in breach of its contractual obligations under the Meli Dólar Terms and Conditions.
Default of the Depositary
If the Depositary fails to pay any amount due under the [Depositary Agreement] or otherwise engages in a default for which it would be liable under the [Depositary Agreement], the Depositary will be in breach of its contractual obligations under the [Depositary Agreement]. In such case, Meli ISAC will have a claim under Bermuda law against the Depositary to the extent that the Depositary is in breach of its contractual obligations under the [Depositary Agreement] (subject to limited recourse in the event of insolvency of Meli ISAC). In addition however, pursuant to the Direct Enforcement Rights and their rights as the Account Owner pursuant to the ISAC Act, the MUSD holders would have direct enforcement rights against the Depositary and all funds of the Depositary not held in its general account are held exclusively for benefit of the MUSD holders as Account Owner.
Status of MUSD Reserves in the event of winding up
In accordance with the ISAC Act, upon winding up of Meli ISAC, the liquidator shall deal with the assets and liabilities of each incorporated segregated account only in accordance with the ISAC Act (and maintain segregation) and in particular shall ensure that the assets of one incorporated segregated account are not applied to the liabilities of any other incorporated segregated account or to the general account and so far as possible the winding up of an ISAC shall be carried out in such a way as not to prejudice the affairs, business and property of any of its incorporated segregated accounts.
Insolvency of the Custodians
If any custodian becomes insolvent, the insolvency proceedings will be governed by [U.S.] law applicable to the insolvency of the custodian. Under current [U.S.] law, it is expected that [comment on the U.S. law treatment of MUSD deposited proceeds and if account balances will constitute assets of the Depositary or the Account Owner – presume the former].
Effect of applicable insolvency law in relation to the Custodians
Pursuant to the custodian agreements, any cash held by the custodians for the Depositary is held by the Custodian as banker. Under current [U.S.] law, it is expected that any cash held for the Depositary by the custodians as banker under the Meli Dólar Terms and Conditions of Use would constitute an unsecured obligation of the custodian. The Depositary would therefore only have an unsecured claim in the event of the custodian's insolvency for such cash, and such cash would also be available to general creditors of the custodian or the U.S. FDIC.
PERSONS HOLDING BENEFICIAL TITLE TO MUSD OR INTERESTS THEREIN ARE REMINDED THAT THE ABOVE DOES NOT CONSTITUTE LEGAL ADVICE AND IN THE EVENT OF ANY DOUBT REGARDING THE EFFECT OF THE DEFAULT OR INSOLVENCY OF THE DISTRIBUTOR, THE DEPOSITARY OR THE CUSTODIAN, SUCH PERSONS SHOULD CONSULT THEIR OWN ADVISERS IN MAKING A DETERMINATION.