How Does Hashnote Work?
A tokenized US Treasury fund (USYC) operated by Circle (NYSE:CRCL) that lets you earn government bond yields on-chain. It manages $2.83B in assets as the #1 tokenized Treasury fund globally, with ~65% of TVL held as Binance institutional collateral on BNB Chain. Its C grade reflects concentrated counterparty risk at both the Binance/Ceffu custody level and downstream in protocols that use USYC-backed stablecoins.
TVL
$3.0B
Sector
RWA
Risk Grade
C+
Value Grade
B+
Core Mechanisms
RWA-Tokenization
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.
3.5.1
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.
Whitelist-Minting
Whitelisted institutional minting: only approved entities can mint USYC by depositing USD
Hashnote restricts minting to whitelisted partners like Usual protocol and Binance (via Ceffu). This enables KYC/AML compliance but creates centralization and single-point-of-failure risk. Binance's Ceffu custody accounts for ~$1.84B of the $2.83B TVL.
T1-Redemption
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. Circle's USDC<>USYC atomic conversion partially mitigates this for institutional holders.
Custody-Chain
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. Ceffu (Binance institutional custody) is now the largest single counterparty by TVL.
How the Pieces Interact
USYC remains a primary backing asset for Usual's USD0 stablecoin, though the collateral basket was diversified in 2025-2026 to include M by M^0, USDTB (Ethena), BUIDL, and OUSG. Concentration risk has decreased from sole-primary to one-of-several, but a USYC depeg would still materially impair USD0 peg stability.
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 downstream stablecoin products that depend on it
Circle/Hashnote can unilaterally block minting or redemption for any holder. If Hashnote freezes a major partner's access (due to legal pressure or dispute), that partner loses ability to maintain peg through arbitrage
What Could Go Wrong
- USYC is now a Circle product (acquired Jan 2025, Circle NYSE:CRCL since June 2025), improving regulatory standing, but ~65% of USYC TVL (~$1.84B) is concentrated on BNB Chain as Binance institutional collateral via Ceffu custody — a new single-counterparty concentration risk.
- Institutional-only access (KYC/AML required for direct redemption) limits retail adoption and creates secondary market liquidity risk during stress events when institutional redemptions dominate.
- Smart contract risk from yield distribution and redemption mechanics; USYC's multi-chain footprint (Ethereum, BNB Chain, Sui, Noble, Near) expands the attack surface, and downstream DeFi protocols using USD0 and other USYC-backed products remain exposed to cascading liquidations.
Treasury Depeg Cascades Through DeFi via Usual USD0
ModerateTrigger: Hashnote's USYC loses peg due to US Treasury default, regulatory action, or operational failure, triggering cascade through Usual's USD0 and broader DeFi collateral chains
- 1.Hashnote USYC depegs from $1 to $0.85 due to US Treasury payment delay, regulatory freeze of underlying assets, or operational breach in custody chain — Usual's USD0 stablecoin, backed partially by USYC (alongside M, USDTB, BUIDL, OUSG), trades below $1 as USYC redemption arbitrage fails
- 2.DeFi protocols using USD0 as collateral (Aave, Morpho, etc.) trigger cascading liquidations as USD0 drops to $0.90 — Leveraged positions unwind; borrowers face unexpected liquidations, lenders face bad debt as collateral value crashes
- 3.Market loses confidence in all RWA stablecoins; USYC holders rush to redeem, but Hashnote faces T+1 or T+2 settlement delays on underlying Treasuries — Redemption queue grows to weeks; USYC trades at increasing discount (potentially to $0.70), amplifying losses
- 4.Contagion spreads to other treasury-backed stablecoins (USDY, OUSG, BUIDL) as market questions entire RWA sector — RWA sector ($10B+ TVL) faces confidence crisis; institutional adoption narrative collapses, potentially setting back DeFi-TradFi integration by years
Risk Profile at a Glance
Overall: C+ (39/100)
Lower score = safer