Understanding tokenized investment fund with Superstate's USTB and USCC Fund
Stablecoin Musings #7
TradFi is reasonably sound, however it has few key points of inefficiency. Superstate is working to "modernize investing" by creating tokenized investment products that leverage three key blockchain advantages:
Speed
Programmability
Compliance capabilities
Crypto is fundamentally about trust—both the programmability of trust and the integration of trust with money. The tokenized asset market, which is as of writing currently around $17B in AUM, offers potential solutions to these challenges. Within this emerging sector, Superstate has established itself as a key innovator, particularly in bringing traditional fixed-income products on-chain.
Understanding tokenization
Asset tokenization is simply transforming real-world assets into blockchain-based digital tokens. In general, there will be the underlying asset layer, the tokenization protocol layer, and the blockchain infrastructure layer. Let’s use a simple example of a $10M commercial office building in Sydney.
Underlying asset layer will contain the building “itself” (everything is based on its $10M value), physical property attributes (20,000 sq m, 7 floors), legal documentation such property deed, title insurance, etc., and asset valuation reports and property management agreements.
The tokenization protocol layer will include smart contracts defining certain amount of tokens. If 10,000 tokens are created, then each represents 0.01% ownership. Each token would represent an atomic unit of ownership in the underlying asset with the smart contract defining parameters such total supply, divisibility granularity, transfer mechanisms, and so forth.
Most implementation typically occurs on EVM-compatible chains but for our example, the primary token contract will be deployed on Ethereum mainnet. Token operations validated by network nodes and there will be a onchain record of:
Token transfers between wallets
Rental income distributions
Ownership changes
Voting on property decisions
What’s a tokenized investment fund?
A tokenized investment fund uses blockchain to track and transfer ownership, but otherwise operates like a normal fund. Think of it like digitizing the paperwork and processes of a traditional investment fund.
For example, Superstate's USTB fund invests in regular U.S. Treasury bonds. The main difference is that instead of receiving traditional fund shares, investors get USTB tokens on Ethereum. These tokens represent their ownership stake in the fund.
The actual money management stays traditional—professional managers, regulated custodians, normal banking relationships, etc. The key advantage is automation through smart contracts. Buying, selling, and transferring shares happens instantly through code rather than manual paperwork. But underneath, it's still just a normal investment fund buying normal investments.
USTB: Bridging traditional and digital finance
What are Treasury Bills and their importance
Treasury Bills or T-Bills, are short-term debt securities issued by the U.S. Department of the Treasury with maturities ranging from 4 to 52 weeks. These zero-coupon instruments (do not pay interest until maturity) are sold at a discount from their face value, with the difference representing the investor's return.
T-Bills play a crucial role in government financing, particularly in serving as a tool for meeting short-term funding needs and managing budget deficits. They are considered among the safest investments due to their backing by the full faith and credit of the U.S. government. Beyond their function as a funding mechanism, T-Bills also importantly serve as a benchmark for short-term interest rates, impacting borrowing costs for businesses and consumers. Also, central banks use Treasury securities to control the money supply and manage inflation by buying and selling them in financial markets.
How USTB works
The USTB fund invests in short-duration U.S. Treasury and U.S. Agency securities. According to the fund details, it charges a 0.15% management fee and seeks current income consistent with liquidity and stability of principal, targeting returns in line with the federal funds rate. The portfolio consists of U.S. Treasury Bills with maturities ranging from January to July 2025.
The portfolio composition shows a laddered approach to Treasury Bill investments, with holdings spread across various near-term maturities. This helps to manage both liquidity and interest rate exposure while maintaining consistent yield generation.
Importantly, USTB offers two ownership structures:
On-chain ownership through tokenized shares on Ethereum
Traditional book-entry recordkeeping for investors who prefer standard record-keeping methods
Both structures benefit from the fund's instant mint/redeem capabilities, a feature unique to USTB among tokenized Treasury products.
Continuous NAV
The continuous Net Asset Value (NAV) system updates USTB's price in real-time through a NAV Calculation Agent, compared to traditional funds that price once daily. This enables immediate interest accrual upon investment, eliminating standard settlement delays. The system uses multiple oracle services to validate pricing data: a custom oracle for continuous pricing and Chainlink for daily NAV verification.
Unlike traditional funds and certain other tokenized Treasury products, USTB allows trading at any time, including weekends and holidays. This means investors can buy or sell their positions even when conventional Treasury markets are closed, reducing the time funds would typically sit idle waiting for market hours.
Protocol mint and redeem features
The Protocol Mint/Redeem system enables atomic conversion between USDC and USTB fund shares. Using single-transaction operations, investors can instantly mint USTB by depositing USDC or redeem USTB back to USDC. This process is powered by a dual-oracle setup: a custom on-chain oracle for continuous pricing and Chainlink integration for daily NAV verification.
A dedicated liquidity pool ($10M) ensures reliable redemptions, while a comprehensive allowlist system enforces regulatory compliance. The protocol enables whitelisted peer-to-peer transfers, combining traditional finance's regulatory requirements with DeFi's programmable infrastructure. This creates a compliant, efficient bridge between U.S. Treasury yields and blockchain technology.
USCC: Innovation in crypto trading strategies
Understanding basis trading is crucial for understanding USCC because it's the core mechanism driving the fund's returns and risk management. USCC simultaneously buys crypto assets (like Bitcoin and Ether) in the spot market while taking short positions in the futures market. The fund generates returns from the "basis”—the price difference between spot and futures markets. These yields exist because futures contracts in crypto markets typically trade at a premium to spot.
What makes this strategy particularly interesting is its market-neutral nature. By holding equal but opposite positions in spot and futures, USCC is protected against directional price movements in the underlying crypto assets. If Bitcoin's price rises or falls, the gain/loss in one position is offset by the other.
Cash-and-carry strategy explained
The cash-and-carry strategy is a common basis trading approach. It involves simultaneously purchasing an asset in the spot market and selling a futures contract for the same asset.
For example, a trader simultaneously:
Buys an asset (spot market) such as Bitcoin at $40k
Sells a futures contract for that same asset at $40,050
The difference between these prices is called the basis and in our case, it would be a basis of -$50. As spot and futures prices naturally converge at expiration, the trader profits from this convergence.
Staking yield
Fundamentally, staking involves locking up tokens to support network operations and earn rewards. These yields can be incorporated into basis trading strategies (such as cash-and-carry) to enhance overall returns. This is because if a volatile-price asset can be staked for a high interest rate, traders can simultaneously take positions in spot and futures markets while earning staking rewards.
This approach allows traders to potentially benefit from both the basis trade and the staking yield, creating more sophisticated and potentially lucrative trading opportunities in the cryptocurrency market.
Yield optimization
The fund combines multiple revenue streams to maximize returns: the basic cash-and-carry trade (showing implied yields ranging from 12-15% on Bitcoin positions and 11-12% on Ethereum positions), enhanced by additional yield from staking Ether positions (generating 2.73-3.07% from staked ETH and lsETH). The fund further optimizes returns by allocating about 36.5% of its portfolio to USTB, which provides an additional yield stream while maintaining high liquidity for managing margin requirements and investor redemptions.
Technical infrastructure
Smart contract architecture
Superstate's infrastructure is built on upgradeable OpenZeppelin ERC20 tokens (USTB and USCC), managed through proxy contracts with admin controls. USTB protocol redemptions happen atomically (in single transactions) through the RedemptionIdle contract, which manages USDC liquidity. USTB protocol subscriptions also occur atomically, but through the USTB token contract, which forwards USDC liquidity to Superstate to purchase treasury bills off-chain.
Pricing is primarily managed by a custom Continuous Price Oracle, which extrapolates real-time prices between NAV checkpoints. Chainlink oracles provide NAV/Share price data for both tokens, offering an additional reference point for pricing. Access control is enforced through the AllowlistV2 contract, which organizes users by Entity IDs and assigns token permissions (USTB and USCC) through a simple boolean system.
Recent developments
Resolv x Superstate
Superstate very recently announced a strategic collaboration with Resolv (check out our brief on it). So how does this impact USCC in particular?
The partnership affects USCC in two ways. First, it can now use stUSR to access perpetual futures yields, expanding beyond its crypto basis trading. Second, USCC itself becomes collateral for Resolv's USR stablecoin, marking its first use as backing for a DeFi protocol.
Anzen x Superstate
Around the same time, Anzen announced it will use both USTB and USCC as collateral for its USDz stablecoin. Unlike the Resolv partnership where USCC provides yield through basis trading, Anzen is leveraging both Superstate funds to strengthen USDz's backing. The integration aims to improve USDz through more diverse institutional-grade collateral, faster redemptions, and the security of Superstate's bankruptcy-remote structure.
Frax x Superstate
Earlier this year, Frax Finance integrated Superstate's USCC and USTB as backing for their frxUSD stablecoin, allowing it to generate yield in different market conditions.
Now, frxUSD can earn higher yields through USCC's crypto basis trading and when yields are lower in crypto markets and can earn stable returns through USTB's T-Bill investments. It's designed to give frxUSD holders the best possible returns while keeping their money safe with institutional-grade backing.
Why Superstate matters for stablecoins
The first major impact comes through Superstate's funds being used as collateral for stablecoins. Both USTB and USCC are being integrated into stablecoin protocols like Anzen's USDz and Resolv's USR, where they serve as high-quality backing assets. USTB provides exposure to U.S. Treasury yields with on-chain liquidity, while USCC offers market-neutral crypto yields—both of which can generate steady returns while maintaining stability. This marks a shift from traditional stablecoin designs that rely primarily on USDC or direct Treasury holdings.
The second impact is through Superstate's role in bridging TradFi and stablecoins. Their Protocol Mint and Redeem feature allows seamless conversion between USDC and their fund tokens in single blockchain transactions. This creates an efficient pipeline where stablecoin holders (specifically USDC holders) can easily move their assets into yield-generating Treasury or crypto-basis strategies and back again. For stablecoin protocols, this means they can programmatically access these strategies through smart contracts, potentially automating yield generation for their reserves.
Conclusion
The funds' architecture addresses real market needs by combining traditional financial mechanisms with blockchain capabilities. USTB brings Treasury yields on-chain with daily liquidity and programmatic access, while USCC leverages the structural inefficiencies between spot and futures markets alongside staking yields. The integration of these products by protocols like Resolv and Anzen demonstrates practical applications in providing stable, yield-generating collateral for decentralized lending and stablecoin systems.
As the tokenized asset market continues to evolve, the lessons learned from these early implementations—particularly around price oracle design, compliance systems, and DeFi integrations—will form future developments in this space.
Special thanks to Emily for feedback and review.
Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.
References:
https://www.pwc.com/us/en/tech-effect/emerging-tech/tokenization-in-financial-services.html
https://corporatefinanceinstitute.com/resources/derivatives/cash-and-carry-arbitrage/
https://docs.superstate.co/introduction-to-superstate/smart-contracts