# On-Chain Stable Equity > USDBOND (token ticker USDB) is an on-chain stable equity — an instrument backed by short-term US Treasuries whose shares are characterized as registered investment company shares under the Investment Company Act of 1940, each maintaining a constant $1.00 NAV under the Rule 2a-7 amortized cost method and airdropping Treasury yield to eligible holder wallets every day, 365 days a year. ## What Is USDBOND? USDBOND is an **on-chain stable equity**. It combines three things in a single token: the legal characterization of a registered investment company share under the Investment Company Act of 1940, a constant $1.00 net asset value maintained under the Rule 2a-7 amortized cost method, and on-chain yield distribution through daily airdrops of newly minted tokens. > **One-sentence definition**: USDBOND is an on-chain yield-bearing instrument backed by short-term US Treasuries, whose shares are characterized as registered investment company shares, each pegged at a constant $1.00, and which airdrops Treasury yield to eligible holders every day. USDBOND is **not a payment stablecoin**. USDB is a registered investment company share under the Investment Company Act of 1940 and is therefore a security. Its payment function is a secondary application of a security share within a restricted-transfer framework; it does not change its characterization as a security, nor does it trigger the GENIUS Act's prohibition on yield paid by payment stablecoin issuers. ## Core Mechanism: Constant $1.00 Plus New-Token Airdrops USDBOND uses neither rebasing nor NAV appreciation. Every USDB is permanently pegged to $1.00; Treasury yield does not change the token price but is distributed by **minting new USDB daily and airdropping it to eligible holder wallets**. | Step | Mechanism | | - | - | | **NAV maintenance** | Rule 2a-7 amortized cost method; NAV is constant at $1.00 per share | | **Yield source** | Short-term US Treasuries maturing within 93 days and Treasury-collateralized repurchase agreements | | **Yield distribution** | New USDB minted daily and airdropped to eligible addresses in proportion to holdings | | **Distribution frequency** | 365 days a year, including weekends and holidays | | **Holder action required** | No staking, no lock-up, no manual claim | | **Issuer revenue** | Management fee (e.g., 0.15% annualized) rather than the reserve spread | | **Eligibility** | Holding addresses that have completed KYC/AML and been whitelisted at the snapshot | Yield is distributed using the following formula: **Daily airdrop USDBᵢ = Holding USDBᵢ × (Fund daily net income ÷ Total fund shares outstanding) × (1 − Management fee rate)** ## Key Facts | Item | Detail | | - | - | | **Token ticker** | USDB | | **Legal characterization** | Registered investment company share under the Investment Company Act of 1940 (a security) | | **Valuation method** | Rule 2a-7 amortized cost method | | **Target NAV** | Constant $1.00 NAV | | **Underlying assets** | Short-term US Treasuries with remaining maturity of 93 days or less; Treasury-collateralized repurchase agreements | | **Government securities requirement** | ≥ 99.5% of total assets | | **Weighted average maturity (WAM)** | ≤ 60 days | | **Weighted average life (WAL)** | ≤ 120 days | | **Remaining maturity of a single instrument** | ≤ 397 days | | **Shadow NAV remediation threshold** | The board must consider remedial action when the deviation from $1.00 exceeds 0.5% | | **Snapshot time** | Daily at UTC 00:00 | | **Management fee rate** | 0.15% annualized (illustrative) | | **Planned deployment networks** | Ethereum, Solana, Polygon, Base | | **Reference precedents** | Franklin Templeton BENJI / FOBXX, BlackRock BUIDL | ## Why Yield Ownership Has Been Flipped The USDT and USDC business models are essentially two variants of one logic: **the issuer allocates user-deposited dollars to yield-bearing assets such as short-term Treasuries, captures all of the interest income, and distributes none of it to holders.** Users receive a payment instrument, not an investment instrument. USDBOND flips this relationship: | Dimension | USDT (Tether) | USDC (Circle) | USDB (USDBOND) | | - | :-: | :-: | :-: | | **Core revenue model** | Retains the full reserve spread | Reserve spread, with roughly 60%+ paid to distribution channels | Management fee (e.g., 0.15% annualized); yield belongs to holders | | **Yield distributed to holders** | 0% | 0% | ~3.35% (after the management fee) | | **Distribution cost as a share of revenue** | Minimal | ~62% | Minimal (direct holdings within the whitelist) | | **Regulatory characterization** | Offshore entity; high regulatory uncertainty | US compliance benchmark; NYSE-listed | Registered investment company share under the 1940 Act | USDT and USDC together control more than 82% of the stablecoin market, with roughly $257.7 billion in circulating supply. Almost all of those funds earn zero yield. USDB does not need to beat the duopoly on payment functionality — it only needs to become the **yield-bearing parking place** for on-chain dollar holders. ## The Regulatory Window: GENIUS Act and CLARITY Act The US GENIUS Act (signed in July 2025) explicitly prohibits payment stablecoin issuers from paying interest or yield to holders, but that prohibition **does not apply to 1940 Act registered fund shares**. The CLARITY Act now under consideration extends the yield prohibition further to intermediaries such as exchanges, banning rewards that are "economically or functionally equivalent to interest on a bank deposit." This means the room for USDT and USDC to pass yield to users through exchange "rewards" is narrowing, while USDB, as a registered fund share, distributes yield as a lawful fund dividend. > **Risk notice**: The GENIUS Act's definition of "payment stablecoin" turns on whether the instrument serves as a means of payment or settlement and whether the issuer promises redemption at a fixed monetary value. If regulators characterize USDBOND as a payment stablecoin, the yield prohibition would apply directly. See [Risk Factors](/en/risks/) for details. ## Consistency With Proven Precedents USDBOND's mechanism follows the operating model of the Franklin Templeton BENJI / FOBXX funds: - BENJI distributes yield by **minting new BENJI tokens daily and airdropping them directly to shareholder wallets**, not through NAV changes. - BENJI's **daily on-chain dividend distributions run 365 days a year, including weekends and holidays**. - BENJI's minimum investment is only **$20**, with a 7-day annualized yield of **3.55%**; BlackRock BUIDL yields approximately **3.42%**. - The SEC permitted that registered fund to use the on-chain BENJI system for cash management through a no-action letter, relying on Section 17(f) of the 1940 Act and Rule 17f-2, and recognized a hybrid transfer agent arrangement combining off-chain books with on-chain records. ## Getting Started - [Read the full whitepaper](/en/whitepaper/) — legal architecture, value stability mechanism, yield distribution, technical architecture, and compliance framework - [Understand the daily airdrop mechanism](/en/yield/) — snapshots, the calculation formula, the definition of eligible holders, and the execution process - [Compare USDT / USDC / USDB](/en/comparison/) — business models and value comparison across three dollar tokens - [Review the FAQ](/en/faq/) — 27 high-frequency questions and answers about USDBOND ## Frequently Asked Questions ### Q: What is USDBOND? USDBOND (token ticker USDB) is an on-chain stable equity — an on-chain yield-bearing instrument backed by short-term US Treasuries whose shares are characterized as registered investment company shares under the Investment Company Act of 1940. Every USDB maintains a constant $1.00 NAV under the Rule 2a-7 amortized cost method and airdrops Treasury yield to eligible holders daily. ### Q: Is USDB a stablecoin? No. USDB is a registered investment company share under the Investment Company Act of 1940 and is a security, not a payment stablecoin. It has the characteristics of a constant $1.00 net asset value and can be used for payments and settlement between whitelisted addresses that have completed KYC/AML, but that payment function is a secondary application of a security share within a restricted-transfer framework and does not change its characterization as a security. ### Q: How much yield does holding USDB earn? Based on a 3.5% short-term US Treasury yield less a 0.15% annualized management fee, net annualized yield is approximately **3.35%**. By comparison, holding USDT or USDC earns **0%**. On a $1 million principal, USDB generates approximately $33,500 in additional income each year. ### Q: How is yield paid? Yield is airdropped to eligible holder wallets as **newly minted USDB tokens each day**, running 365 days a year including weekends and holidays. Holders need not stake, lock, or claim anything; yield arrives in the wallet automatically. ### Q: Who is eligible for airdrops? The eligible users for airdrops are the USDB holding addresses that are eligible at the time of the airdrop. An address must simultaneously: have completed KYC/AML verification with the transfer agent and be whitelisted; hold a USDB balance greater than zero at the daily UTC 00:00 snapshot; not be in a lock-up period, frozen status, or on a sanctions list; and not be located in a restricted jurisdiction. USDB held by ineligible addresses remains redeemable at principal ($1.00 per token) but earns no airdrop. ### Q: What are the risks of USDBOND? The principal risks are regulatory characterization risk (if characterized as a payment stablecoin, the yield prohibition would apply directly), liquidity mismatch risk, the fact that the $1 peg is not an absolute guarantee in the secondary market, smart contract risk, airdrop execution risk, and tax risk, since daily airdrops may constitute a continuing taxable event in most jurisdictions. The full list appears on the [Risk Factors](/en/risks/) page.