How Does Hashnote Work?

USYC: yield-bearing ERC-20 token representing shares in Hashnote International Short Duration Yield Fund backed by US Treasury Bills

USYC is an appreciation-model token (value increases over time) representing ownership of short-term US Treasuries and repo activity. Standard RWA tokenization pattern following Franklin Templeton's BENJI and BlackRock's BUIDL. Earns Fed Funds rate.

Appreciation model: token value increases over time rather than distributing separate yield

Unlike dividend-paying tokens, USYC accrues value directly into token price. This simplifies accounting and tax treatment but makes yield less transparent. Each USYC token represents pro-rata share of growing Treasury fund.

Whitelisted institutional minting: only approved entities can mint USYC by depositing USD

Hashnote restricts minting to whitelisted partners like Usual protocol. This enables KYC/AML compliance but creates centralization and single-point-of-failure risk. Usual holds >$700M of USYC (~140% of total supply).

T+1 redemption process: USYC holders face one-day settlement delay when redeeming for USD

Since USYC is backed by physical US Treasuries with T+1 settlement, redemptions cannot be instant. This creates standard money-market fund liquidity risk where stress events cause redemption queues and price dislocations.

Multi-party custody: Hashnote uses third-party custodians for Treasury holdings, creating operational dependencies

Standard RWA pattern where on-chain token is legally backed by off-chain assets held by regulated custodians. Creates counterparty risk to custodian, fund administrator, and Hashnote entity itself.

Usual holds ~$700M USYC (>50% of its TVL) as primary backing for USD0. If USYC depegs or faces redemption delays, USD0 immediately loses 1:1 backing and depegs, potentially collapsing Usual protocol

During market stress, USYC holders rushing to redeem face T+1 settlement queue. Early redeemers get $1, but as queue grows, USYC trades at discount in secondary market, creating classic bank run incentive structure

USD0 is used as collateral across DeFi (Aave, Morpho, etc.). A USYC depeg causing USD0 depeg would trigger simultaneous liquidations across all protocols, creating billions in forced selling and bad debt

If SEC deems USYC an unregistered security, all tokens could be frozen and underlying Treasuries seized, making USYC worthless and collapsing Usual USD0 which depends on it

Hashnote can unilaterally block minting or redemption for any holder. If Hashnote freezes Usual's access (due to legal pressure or dispute), USD0 loses ability to maintain peg through arbitrage