USDY (US Dollar Yield Token) is a tokenized note secured by short-term US Treasuries and bank demand deposits. It's designed for non-US individual and institutional investors seeking exposure to high-quality, US dollar-denominated yield while maintaining the accessibility of a stablecoin.
What Is USDY?
USDY combines the stability of traditional finance with the innovation of digital assets. Each token represents a claim on underlying assets consisting of short-term US Treasury securities and bank demand deposits. This structure provides investors with daily accruing yield while maintaining capital preservation through high-quality collateral.
There are two distinct versions of this financial instrument:
- USDY (Accumulating Version): The token's price increases daily as yield accrues, similar to a savings account where value grows through compounded interest.
- rUSDY (Rebasing Version): The token price remains fixed at $1.00 while the quantity of tokens in your wallet increases daily to reflect yield accumulation.
The fundamental difference lies in how yield is represented. With USDY, your wallet shows fewer tokens at a higher price per token. With rUSDY, your wallet shows more tokens at a fixed price of $1.00 each. Both versions represent the same underlying value and can be converted instantly between forms.
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How USDY Works: The Complete Process
Eligibility and Onboarding
To access USDY products, investors must meet specific eligibility criteria and complete a thorough onboarding process. This includes:
- Completing Know Your Customer (KYC) verification
- Providing a wallet address for token receipt
- Signing required legal documentation
- Confirming non-US person status per regulatory requirements
The onboarding process ensures compliance with applicable US securities laws and international regulations.
Investment Process
Once onboarded, the investment process follows four distinct phases:
- Funds Deposit: Investors can deposit USDC at any time after receiving eligibility confirmation. For larger investments exceeding $100,000, USD bank wire transfers are also available. Interest accrual begins immediately upon fund processing, typically within 2-3 business days.
- Cohort Assignment: Each purchase is assigned to a specific cohort that determines the token issuance date. This grouping approach ensures compliance with regulatory requirements governing the offering.
- Certificate Generation: Upon fund processing, investors receive a Temporary Global Certificate representing their right to receive tokens after the mandatory waiting period of 40-50 days.
- Token Minting: After the required time period, tokens are minted and delivered to the designated wallet address. Investors can then transfer these tokens to other eligible parties within approved jurisdictions.
Redemption Mechanics
Redemption follows specific regulatory requirements:
- Redemptions are processed only via bank wire to non-US bank accounts
- Investors must provide valid bank details before processing redemption requests
- Temporary Global Certificate redemptions require minimum amounts of $100,000
- Token holders can redeem smaller amounts after the minting process completes
The redemption process emphasizes regulatory compliance while providing investors with access to their funds.
Understanding rUSDY Mechanics
The Wrapping Concept
rUSDY functions as a wrapped version of USDY. Each rUSDY token corresponds to a specific amount of USDY locked in a wrapper contract. This mechanism enables the rebasing feature while maintaining full collateralization.
The conversion process works as follows:
- When converting USDY to rUSDY, USDY tokens are locked in a smart contract
- The contract mints an equivalent value of rUSDY tokens at the $1.00 price point
- These rUSDY tokens are delivered to the investor's wallet
- The reverse process occurs when converting back to USDY
Supply Calculations and TVL
The total value locked (TVL) in the USDY ecosystem requires careful calculation due to the wrapping mechanism. The wrapped USDY serves as collateral for rUSDY tokens, meaning:
- Total USDY TVL includes both wrapped and non-wrapped USDY tokens
- rUSDY tokens represent claims on wrapped USDY collateral
- Double-counting must be avoided when calculating overall value
The accurate TVL calculation can be expressed as:Total USDY TVL = Number of rUSDY tokens × $1.00 + Number of non-wrapped USDY tokens × USDY reference price
Rebasing Mechanism
Rebasing maintains rUSDY's price stability at $1.00 through supply adjustments. As the underlying assets generate yield, the number of rUSDY tokens increases to maintain the fixed price point.
The rebasing process:
- Occurs daily based on yield accumulation
- Adjusts token quantities in investor wallets
- Maintains the $1.00 price per token
- Reflects actual yield earned on underlying assets
This mechanism provides investors with a stable-value token that still captures yield through quantity increases rather than price appreciation.
Frequently Asked Questions
Who can invest in USDY products?
USDY is available to non-US individual and institutional investors who complete the onboarding process and meet eligibility requirements. US persons and entities are prohibited from participating due to regulatory constraints.
How is the yield generated?
Yield comes from the underlying assets consisting of short-term US Treasury securities and bank demand deposits. The interest generated by these assets is passed through to token holders after accounting for operational expenses.
What is the minimum investment amount?
The standard minimum investment requires depositing sufficient funds to generate meaningful participation. Specific minimums may vary based on investment vehicle and current terms, though the structure accommodates various investment sizes.
How often does rebasing occur for rUSDY?
Rebasing occurs daily, reflecting the yield accrued on underlying assets. The token quantity in wallets updates automatically to maintain the $1.00 price while accounting for earned interest.
Can I transfer USDY tokens to other investors?
Once tokens are minted and delivered to your wallet, you can transfer them to other eligible investors within approved jurisdictions. Transfers must comply with applicable securities laws and platform requirements.
What risks are associated with USDY investments?
Like any investment, USDY carries risks including potential loss of principal, regulatory changes, smart contract risks, and market conditions. Investors should carefully review offering documents and understand all risk factors before investing.
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Regulatory Compliance and Considerations
USDY operates within a strict regulatory framework designed to comply with US securities laws and international regulations. The product structure includes:
- Comprehensive KYC and AML procedures
- Restrictions on US person participation
- Compliance with securities offering requirements
- Regular auditing and reporting
- Transparent governance processes
Investors receive detailed documentation outlining terms, conditions, and risk factors. The legal structure ensures proper protection for all participants while maintaining regulatory compliance.
Investment Considerations
When evaluating USDY products, investors should consider:
- Yield Expectations: Current yield rates and historical performance
- Liquidity Profile: The 40-50 day minting period and redemption process
- Counterparty Risk: The organization behind the product and its track record
- Regulatory Environment: Potential changes in securities regulations
- Market Conditions: Impact of interest rate changes on underlying assets
These factors help investors make informed decisions about incorporating USDY into their investment strategies.
The combination of traditional finance security with blockchain accessibility makes USDY an innovative option for non-US investors seeking dollar-denominated yield. The dual-token structure provides flexibility in how investors prefer to view and manage their yield-bearing assets.