Synthetic Dollar Stablecoin With Credit Collateral Launched

Pareto introduced a new synthetic dollar fully backed by private loans. The initiative aims to provide institutional investors with access to decentralized finance markets.

The Pareto platform announced the launch of USP, a stablecoin representing a synthetic U.S. dollar, fully collateralized by on-chain credit obligations of institutional borrowers.

To mint USP tokens, users must deposit USDC or USDS stablecoins into a liquidity pool that will serve as collateral for the asset. The deposited funds will be placed into the platform’s lending vaults. To maintain USP’s peg to the U.S. dollar, Pareto uses a native collateralization process where each USP token is minted only after an equivalent amount of dollar stablecoins is deposited, ensuring full collateralization upon token creation. Additionally, an arbitrage mechanism will help maintain the dollar peg.

According to Matteo Pandolfi, Co-Founder of Pareto, the initiative will allow institutional investors to gain safe and transparent access to the private credit market while leveraging the efficiency of the DeFi ecosystem. Pandolfi also believes that using USP will minimize the risks associated with traditional financial systems.

Owners of the synthetic USP dollar from Pareto will also be able to stake it. The sUSP pool will generate yield through real institutional lending strategies.

In June 2024, Tether launched a synthetic stablecoin aUSDT, collateralized by the XAUt token and pegged to the U.S. dollar.