What Is USP and How Does It Work?

Pareto’s newly introduced synthetic dollar called USP is fully backed by stablecoins such as USDC and USDt. Users can mint USP by depositing these stablecoins as collateral. The system guarantees a 1:1 collateral ratio, allowing USP to be issued in proportion to the amount of deposited stablecoins.

The deposited assets are transferred into Pareto’s credit vaults and loaned exclusively to carefully selected institutional borrowers. This structure provides investors with interest income. In addition, several stabilization mechanisms, such as arbitrage mechanisms and collateral support, are in place to maintain USP’s peg to the US dollar. In case of credit defaults, a protocol-funded reserve fund steps in.

$USP the credit-backed synthetic dollar is now LIVE!

The wait is over! Meet $USP, a new type of synthetic dollar that gives users access to a diversified basket of institutional credit lines. Backed by RWA institutional lending, not by speculative assets.

Stake it. Compose it… pic.twitter.com/Dr4ZUAZYRj

— Pareto (prev Idle) (@paretocredit) May 15, 2025

A Regulated RWA Gateway for Institutional Investors

With this initiative, Pareto offers a regulated and on-chain entry point into the RWA credit market for institutional investors. Interest in private credit tokenization has increased rapidly in recent months, with firms like Tradable and Apollo also tokenizing their portfolios.

Pareto aims to transfer the transparency advantage of DeFi to the private credit sector. Company representatives state that they chose blockchain infrastructure to eliminate the lack of data, poor risk management, and manual processes seen in traditional credit markets.

“Our goal is not to replicate the shortcomings of traditional finance but to rebuild private credit with DeFi’s transparency and efficiency,” says Pareto co-founder Matteo Pandolfi.

Why Are Synthetic Dollars Important?

Although synthetic stablecoins make up a small portion of the total stablecoin market, they are pioneering innovation in the creation and management of digital dollars. Projects like Ethena continue to grow by offering investors up to 10% annual yield through synthetic assets.

Despite this success, regulators still favor traditionally collateralized stablecoins. Legislative proposals such as the GENIUS Act and the STABLE Act in the US aim to implement stricter regulations on stablecoins. Experts see these efforts as part of a strategic move to protect the global reserve currency status of the US dollar.

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