# RWA Collateral

USD0 collateral follows Usual’s stringent risk policy. It is backed exclusively by secure, short-duration assets, primarily U.S. Treasury Bills accessed through overnight repo and similar cash-management instruments.

Usual Labs selects collateral providers through extensive due diligence of the relevant market participants to mitigate counterparty and default risks. The objective is to provide USD0 holders with a security framework that is designed to exceed typical industry standards.

## Overview

The **RWA Aggregator** is a core component of the **Usual Collateral Bridge Infrastructure (UCBI)**—the foundational layer that powers **USD0** minting, redemption, and collateral management.

It aggregates tokenized **Real-World Assets (RWAs)** from multiple institutional providers into a unified, **permissionless** on-chain system. This enables USD0 to operate as a **fully collateralized**, **on-chain verifiable** stablecoin.

Instead of relying on a single collateral source or opaque off-chain reserves, the RWA Aggregator consolidates collateral from leading tokenized-asset issuers into a transparent and composable stablecoin that can be **minted and redeemed 1:1**.

***

## Architecture

The RWA Aggregator connects permissioned RWA tokenizers to permissionless DeFi users.

```
┌─────────────────────────────────────────────────────────────┐
│                   RWA Tokenizers (Permissioned)             │
│  ┌──────────┐  ┌──────────┐  ┌──────────┐  ┌────────────┐   │
│  │ Hashnote │  │  M by M0 │  │  USTBL   │  │   Others   │   │
│  │  (USYC)  │  │          │  │ (Spiko)  │  │            │   │
│  └────┬─────┘  └────┬─────┘  └────┬─────┘  └─────┬──────┘   │
└───────┼──────────────┼──────────────┼─────────────┼─────────┘
        │              │              │             │
        ▼              ▼              ▼             ▼
┌─────────────────────────────────────────────────────────────┐
│              RWA Aggregator (UCBI Layer)                    │
│                                                             │
│  ┌───────────────────┐    ┌──────────────────────────┐      │
│  │  Multi Collateral │    │  Collateral Wrapping &   │      │
│  │    Controller     │    │  On-Chain Verification   │      │
│  └────────┬──────────┘    └────────────┬─────────────┘      │
│           │                            │                    │
│           ▼                            ▼                    │
│  ┌──────────────────────────────────────────────────┐       │
│  │           DaoCollateral Contract                 │       │
│  │    0xde6e1F680C4816446C8D515989E2358636A38b04    │       │
│  └──────────────────────┬───────────────────────────┘       │
└─────────────────────────┼───────────────────────────────────┘
                          │
                          ▼
┌─────────────────────────────────────────────────────────────┐
│                 USD0 (Permissionless)                       │
│          0x73A15FeD60Bf67631dC6cd7Bc5B6e8da8190aCF5         │
│                                                             │
│   Mint ◄──► Redeem ◄──► Trade ◄──► Compose in DeFi          │
└─────────────────────────────────────────────────────────────┘
```

**Key idea:** UCBI bridges permissioned RWA issuance with permissionless DeFi participation, while maintaining **1:1 mint/redeem** behavior and on-chain transparency.

***

## Collateral Eligibility Criteria

Before any Real-World Asset (RWA) tokenizer is accepted as collateral for USD0, it must pass a comprehensive due diligence process. All accepted collateral must satisfy four core requirements:

<table><thead><tr><th>Criterion</th><th width="520.1849365234375">Requirement</th></tr></thead><tbody><tr><td><strong>Fully Collateralized</strong></td><td><strong>100% collateralized</strong> with <strong>no leverage exposure</strong>. This excludes fractional-reserve risk and any leverage structure that could result in collateral loss.</td></tr><tr><td><strong>Low Risk</strong></td><td>Invested exclusively in liquid <strong>U.S. Treasury Bills</strong> (or equivalent government-backed cash instruments). Counterparty, liquidity, credit, interest-rate, and FX risks are each evaluated independently.</td></tr><tr><td><strong>Transparent</strong></td><td>Verifiable <strong>on-chain in real time</strong>, with frequent public financial audits to provide high off-chain transparency.</td></tr><tr><td><strong>Liquid</strong></td><td>Highly liquid with <strong>portfolio duration &#x3C; 0.33 years</strong> (~4 months). Any collateral exceeding this duration threshold is ineligible. Redemptions must be achievable with minimal slippage within a maximum of 5 <strong>business days</strong>.</td></tr></tbody></table>

***

## Financial Risk Policy

Usual enforces a multi-layer risk management framework with **zero tolerance** for credit and FX risk:

* **Interest Rate Risk**
  * Individual RWA duration must be **< 0.5 years**.
  * Portfolio average duration must not exceed **0.33 years**.
  * A passive fluctuation tolerance of **0.25 years** is allowed.
  * If breached, corrective measures may include duration adjustment, withdrawal restrictions, and/or insurance fund increases.
* **FX Risk**
  * **Zero tolerance**: only USD-denominated assets or **100% FX-hedged** positions are accepted.
  * FX exposure is monitored by both the tokenizer and Usual independently.
* **Credit Risk**
  * **Zero tolerance**: investments restricted to **U.S. Treasuries**, quasi-government debt, or cash.
  * **Corporate debt is prohibited**.
* **Liquidity Risk**
  * Portfolio diversification across multiple RWA types is used to reduce asset-class-specific illiquidity risk.

***

## Primary Collateral: Hashnote USYC

| Property               | Detail                                                   |
| ---------------------- | -------------------------------------------------------- |
| **Token**              | USYC (Short Duration Yield Fund)                         |
| **Contract**           | `0x136471a34f6ef19fE571EFFC1CA711fdb8E49f2b`             |
| **Strategy**           | Reverse repurchase agreements + US Government securities |
| **Custody**            | BNY Mellon                                               |
| **Prime Broker**       | Marex                                                    |
| **Auditor**            | Cohen and Co                                             |
| **Fund Administrator** | NAV Consulting                                           |
| **Regulatory**         | CIMA Licensed, CFTC Registered                           |
| **Settlement**         | T+0 to T+1 into USDC or PYUSD                            |

USYC was the first tokenizer to pass Usual’s due diligence process. Its underlying reverse repos are made with the **Depository Trust & Clearing Corporation (DTCC)**, which carries an **AA- credit rating**.

Usual’s first and primary collateral partner is [Hashnote](https://usyc.hashnote.com/). Over time, the protocol intends to diversify USD0 (bUSD0) collateral holdings to further reduce concentration risk. Any future collateral additions remain subject to community governance.

### What is USYC?

USYC is the on-chain representation of the **Hashnote International Short Duration Yield Fund Ltd.** (“SDYF”). SDYF invests primarily in:

* [Reverse repurchase agreements](https://www.investopedia.com/terms/r/reverserepurchaseagreement.asp)
* U.S. Government-backed securities

The underlying reverse repos are conducted with the **Depository Trust & Clearing Corporation (DTCC)** (credit rating **AA-**). Hashnote is managed by an experienced investment team.

### Why USYC?

Because USYC is invested in overnight repo, it is designed to minimize:

* market risk,
* duration risk,
* and credit risk.

This results in a risk profile comparable to a U.S. Treasury money market fund, while also providing ERC-20 benefits such as transaction speed, transparency, and composability.

USYC provides access to short-term “risk-free” returns by deploying assets primarily into reverse repo, with a portion allocated to T-Bills to maintain maximum liquidity and minimal duration exposure.

### Liquidity

* Mint/redeem time: **T+0 to T+1** into **USDC** or **PYUSD**
* Atomic on-chain instant mint/redeem:
  * On-chain mint is available only during **market hours**
  * On-chain redemption is available at any time, but **size-limited**

### Safety

* No credit intermediaries
* No loans to third parties
* Fully regulated by **CIMA**
* Direct access to a **segregated custodial account**

### Transparency

* Assets and token price are published via **oracle feed**
* All fees (service, redemption, custodian) are fully disclosed
* ERC-20 contract is verified on Etherscan

### Fund Management

USYC is operated by Hashnote, an on-chain institutional asset manager backed by partners of **DRW**. Hashnote maintains an in-house fixed income team with a track record in consistent risk-adjusted returns and liquidity management.

### Service Providers & Regulatory Compliance

* Cash and securities custody: **Bank of New York Mellon**
* Hashnote offshore funds: licensed as mutual funds by the **Cayman Islands Monetary Authority (CIMA)**
* U.S. fund manager: registered as a **CPO** with the **Commodity Futures Trading Commission (CFTC)**

### On-Chain Information

| Property               | Value                                        |
| ---------------------- | -------------------------------------------- |
| **Token standard**     | ERC-20                                       |
| **Available networks** | Ethereum                                     |
| **Address**            | `0x136471a34f6ef19fE571EFFC1CA711fdb8E49f2b` |

### Providers

| Role             | Provider                       |
| ---------------- | ------------------------------ |
| **Custody**      | BNY Mellon                     |
| **Prime broker** | Marex                          |
| **Bank**         | Customers Bank                 |
| **Auditor**      | Cohen and Co                   |
| **Fund admin**   | NAV Consulting                 |
| **KYC / AML**    | NAV Consulting, LMO Consulting |

### Regulation

| Region     | Details                                                                 |
| ---------- | ----------------------------------------------------------------------- |
| **US**     | CFTC — US-CPO for Hashnote Feeder Fund                                  |
| **Non-US** | CIMA — SDYF and Hashnote Master Fund registered as Caymans Mutual Funds |

***

## Additional Accepted Collateral

As the protocol has grown, additional collateral types have been onboarded to diversify risk:

<table><thead><tr><th>Asset</th><th width="237.8853759765625">Contract Address</th><th>Type</th><th>Backing</th></tr></thead><tbody><tr><td><strong>USYC</strong> (Hashnote)</td><td><code>0x136471a34f6ef19fE571EFFC1CA711fdb8E49f2b</code></td><td>Primary collateral</td><td>Reverse repos &#x26; U.S. Government securities</td></tr><tr><td><strong>M by M0</strong></td><td><code>0x866A2BF4E572CbcF37D5071A7a58503Bfb36be1b</code></td><td>Collateral</td><td>U.S. Treasury Bills</td></tr><tr><td><strong>USTBL</strong> (Spiko)</td><td><code>0xe4880249745eAc5F1eD9d8F7DF844792D560e750</code></td><td>Collateral</td><td>U.S. Government securities</td></tr><tr><td><strong>USDC</strong></td><td><code>0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48</code></td><td>Indirect minting</td><td>Circle USD Coin</td></tr></tbody></table>

### Wrapped Collateral (Internal Protocol Use)

Usual maintains wrapped versions of certain collateral assets for internal protocol integrations:

| Wrapped Asset                | Contract Address                             |
| ---------------------------- | -------------------------------------------- |
| **UsualM** (Wrapped M)       | `0x4Cbc25559DbBD1272EC5B64c7b5F48a2405e6470` |
| **UsualUSDC** (Wrapped USDC) | `0xb672B3976bAa3952bFb2eCE8eeFB784f8daB1424` |

***

## Tokenizer Due Diligence Process

Every candidate tokenizer is evaluated across the following dimensions before collateral acceptance:

1. **Security**: Only experienced tokenizers whose technology has been thoroughly audited.
2. **Regulatory compliance**: Full compliance with applicable regulations across relevant jurisdictions.
3. **Asset management**: Skilled, compliant managers operating under strict diversification guidelines.
4. **Transparency**: Full transparency of underlying assets, audited by independent third parties.
5. **Asset protection**: Assets must be ring-fenced if the tokenizer enters bankruptcy.
6. **Fee structure**: Fees must be reasonable and must not materially erode returns.
7. **Redemption processes**: Prompt, operationally clear redemption paths.
8. **Diversification**: Diversified exposure across platforms to reduce concentration risk.

### Counterparty Risk Layers

Usual identifies three counterparty-risk layers and applies mitigation controls at each level:

| Layer                   | Mitigation                                                                                                         |
| ----------------------- | ------------------------------------------------------------------------------------------------------------------ |
| **Tokenizer risk**      | Bankruptcy remote vehicles (BRVs), independent audits, periodic performance reviews                                |
| **Fund manager risk**   | Regulated managers with proven track records; ongoing assessment of investment decisions                           |
| **Bank/custodian risk** | Highly rated institutions only; diversified banking relationships; contingency planning for institutional failures |

***

## Community Governance of Collateral

A core differentiator of Usual is that the **community governs which collateral types are accepted** by the protocol. Through USUAL token governance, holders can vote on:

* Adding new collateral types
* Setting maximum exposure limits per collateral provider
* Adjusting risk parameters based on market conditions
* Removing collateral that no longer meets protocol standards

***

## Insurance Fund

Usual maintains an insurance fund per **Liquid Deposit Token (LDT)** to hedge against collateral value loss:

* **Accrual rate**: set by the DAO (approximately **20% of yield**)
* **Maximum cap**: between **0.33% and 5.33%** of all USD0 LDTs
  * calibrated using historical VAR analysis and stress tests simulating extreme interest-rate rises beyond any observed in the last 30 years
* **Replenishment time**: with a **0.33-year** average bond duration and **5%** coupon rate, approximately **24 days** to fully replenish

### Counter Bank Run Mechanism (CBR)

The **Counter Bank Run Mechanism (CBR)** uses the insurance fund to:

* burn USD0, and
* increase the salvageable redemption value per token.

If the salvageable value falls below 1, the DAO can temporarily pause the minting engine and route activity through the secondary market to prioritize re-pegging USD0.