Every Usual balance is backed by real assets held by institutional providers. This article covers what can go wrong at the collateral and counterparty level, and how Usual manages those risks.
The main risks
1. Issuer credit risk (Treasury Bills)
US and Eurozone Treasury Bills are considered extremely safe, but "very safe" is not "risk-free". A major default by the US or a core Eurozone country would affect Usual's reserves. This is a tail risk with no realistic mitigation at the protocol level — it would be a global financial crisis, not a Usual-specific issue.
2. Tokenization provider risk
The Treasury Bills are held on-chain as tokens (USYC, USTBL, EUTBL, UsualM). Each tokenization provider is a legal entity operating a smart contract and off-chain custody:
Hashnote (USYC) — regulated, audited
Spiko (USTBL, EUTBL) — EU-supervised, PwC-audited, Trail of Bits smart contract audits
M0 Foundation (UsualM) — institutional, audited
What can go wrong:
Provider smart contract bug
Provider operational failure
Provider insolvency (legal framework provides ring-fencing)
Provider regulatory action (e.g., a freeze order)
How Usual mitigates:
Diversification across multiple providers
Audits of both the provider's smart contracts and financial accounts
Ring-fencing ensures that provider bankruptcy does not impair the underlying assets
Governance monitoring allows the DAO to respond to provider issues via UIPs
3. Staking provider risk (for ETH0)
ETH0 is backed by Lido's wstETH. Risks specific to staking:
Validator slashing — if a Lido validator is slashed, wstETH loses a small amount of ETH value
Lido smart contract risk — the Lido contracts must work correctly
Validator centralization — if too much stake concentrates in few validators, it increases systemic risk
Lido is the largest, most audited LST in DeFi. These risks are real but historically minor. They do not affect USD0, EUR0, or bUSD0 — only ETH0.
4. DeFi composability risk
Some Usual products (Usual Vaults, USD0 Alpha) rely on underlying DeFi and TradFi infrastructure:
CME futures clearing (for USD0 Alpha) — depends on CME clearing operations
DEX liquidity (for secondary market redemption) — depends on Curve, Uniswap, and other venues
Bridge providers (for multi-chain products) — depends on Chainlink CCIP, LayerZero
These risks are not specific to Usual, but they apply whenever you interact with these components.
Risk profile by product
Product | Primary collateral risk |
USD0 | US Treasury Bill tokenization risk (Hashnote, Spiko, M0) |
EUR0 | Eurozone Treasury Bill tokenization risk (Spiko) |
ETH0 | Lido validator and smart contract risk |
bUSD0 | USD0 collateral risk (inherited) + floor price dynamics |
sUSD0 / sEUR0 | USD0 / EUR0 collateral risk (inherited) |
USD0 Alpha | Basis trade risk + USCC custody chain |
Usual Vaults | Underlying product risks (composition-dependent) |
How Usual selects collateral providers
Every new provider goes through a strict due diligence process:
Regulatory framework — is the provider supervised by a credible regulator?
Asset protection — are assets legally ring-fenced from provider bankruptcy?
Redemption process — how quickly and reliably can assets be redeemed?
Fees — is the cost structure reasonable and not eroding user returns?
Smart contract audit — have the contracts been audited by reputable firms?
Operational maturity — does the provider have a track record?
Providers that do not meet all criteria are not added. The DAO must approve every new collateral type via a UIP.
What happens if a provider fails
The ring-fencing mechanism protects the underlying assets
Usual's smart contract enables direct redemption routes when possible
Liquidity from other diversified providers covers short-term redemption requests
The DAO votes on a response: replace the provider, unwind the position, or hold
Communication happens through official channels
This is a tested pattern, not theoretical. Usual has diversified precisely to reduce dependence on any single provider.
How you can manage this risk
Diversify your holdings across multiple Usual products (not just one stablecoin)
Hold some USD0 on-chain directly rather than all in bUSD0 or Vaults (reduces composition complexity)
Check audit reports for providers and for Usual contracts
Monitor the governance forum for any emerging risk discussions
Follow official announcements on X, Discord, and the blog
Note: Collateral and counterparty risk is the single most important category to understand when holding any yield-bearing product. Read this article fully before committing significant capital.
Technical note (for DeFi users): The Multi Collateral Controller adjusts provider allocation weights based on portfolio optimization and DAO targets. The collateral composition is visible on-chain via the DaoCollateral contract. Provider audits are published by each provider on their own docs and mirrored on docs.usual.money.
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