Author
Superstate Inc., the Investment Manager on behalf of Superstate Crypto Carry Fund (USCC)
Superstate, led by Robert Leshner, is an asset management firm modernizing investing through tokenized financial products. We offer investment products that benefit from the speed, programmability, and compliance advantages of blockchain tokenization. Superstate’s suite of products currently includes a tokenized T-Bill fund (USTB) and a tokenized crypto cash and carry fund (USCC) collectively Superstate Funds. Learn more about Superstate here.
Summary
This proposal seeks to introduce USCC (Superstate Crypto Carry Fund) as collateral backing Frax USD (frxUSD), delivering stability, liquidity, and market-neutral yield as reserves behind the stablecoin.
USCC is a tokenized (ERC-20) crypto cash and carry fund that allows decentralized stablecoins to benefit from the stability of market-neutral positions while generating market-neutral on the assets backing the stablecoin as part of a diversified portfolio.
USCC has daily liquidity, low management fees, no performance fee, transparent holdings, institutional custody, bankruptcy-remote structure, and crypto-native features that make it appealing as an asset behind Frax USD.
This proposal looks to introduce USCC as a collateral asset with an initial cap of $20mm.
Background and Motivations
Frax USD (frxUSD) seeks to onboard billions of dollars as a fully collateralized, fiat-interchangeable asset backed by various stable and yielding assets that can be rebalanced based on the optimal asset allocation by the protocol, depending on the market environment.
As Frax looks to provide savings products for investors, Superstate can provide exposure to various yield opportunities, allowing Frax to optimize exposure regardless of the rate environment.
Superstate, led by Robert Leshner, brings deep crypto-native expertise and highly institutional products to help the Frax ecosystem scale frxUSD with various yield-bearing products that help diversify the stablecoins assets to maximize stability and yield regardless of the market environment.
In addition to Superstate’s USTB (backed by T-Bills) proposal, this proposal seeks to introduce USCC, Superstate Crypto Carry Fund, as a reserve and backing for frxUSD.
USCC Overview
For years, the crypto cash-and-carry trade has been one of the best risk-adjusted opportunities, consistently producing double-digit returns with minimal directional market exposure.
Despite volatile swings and the operational complexity of setting up this trade, the potential returns are extremely attractive. Consistent yield generation in a crypto basis requires active management and has historically only been accessible to highly sophisticated investors, until now.
Spreads between spot and future prices for an asset create opportunities for investors to exploit. Basis (or ‘cash-and-carry’) trades involve an investor buying an asset (long leg) and shorting the corresponding future (short leg), or the reverse. These offsetting positions reduce directional market exposure and, if held to expiry, generate a predictable return as the two legs converge.
In crypto, liquid futures markets exist in both Bitcoin (BTC) and Ether (ETH), providing ample opportunity for crypto basis trading. In addition, long Ether positions can be staked to generate additional yield on deployed capital.
However, in order to execute this strategy effectively, investors need multiple counterparties and have to regularly monitor positions. Frax benefits from investing in USCC to get exposure to this market neutral yield strategy to optimize the reserves and yield backing frxUSD.
Flexible and market-neutral, USCC’s investment strategy optimizes the yield and risk of crypto cash-and-carry trades.
Leveraging Superstate’s deep crypto markets expertise, USCC allocates capital to the best risk-adjusted opportunities at any time across:
- Bitcoin basis
- Ether basis, including staking Ether
- Cash and Treasury Bill products, and
- Basis in crypto commodities approved by CFTC in the future
When the crypto basis is meaningfully above the Federal Funds Rate, USCC will allocate accordingly. Otherwise, USCC will invest in Treasury Bill products until the next material opportunity is presented. As the basis changes, the Fund will adjust exposures and can trade backwardation if the futures curve inverts (e.g. when spot price > futures price).
USCC does not use leverage.
USCC is a simple, transparent, and compliant product for qualified purchasers to access crypto basis.
Investors can subscribe to and redeem from the Fund in USD or USDC, and shares can either be held in book-entry form or be tokenized as an ERC-20 token, which will, in the future, enable transfers between other shareholders for collateral or settlement purposes.
USCC is U.S.-based and structured as a bankruptcy-remote private fund. All trades are executed through top-tier domestic Prime Brokers, and assets are custodied by Anchorage Digital Bank (when spot is not held as margin with a Prime Broker). USCC is also audited annually by Ernst & Young, and NAV Fund Services produces the daily NAV (displayed publicly on the USCC fund page) and monthly statements. See ‘Service Provider’ overview below for more details.
Other Key Details:
- Daily liquidity, no lock-ups
- 75bps Management Fee, no performance fee
- Daily NAV on USCC fund page
- Weekly holdings on USCC fund page
- Monthly statements and annual K1s
- Purchase with USD or USDC
- ERC-20 Tokens or Book Entry shares
- USCC does not use leverage
- Compliant, audited fund for institutional investors:
- Bankruptcy-remote Trust
- 3c7 private fund
USCC’s Investment Mandate
USCC’s investment objective is to generate yield from digital asset basis trading, primarily by executing a “cash and carry” trade investing in the differential between the spot and future price of certain digital asset commodities. The Fund will trade only those digital assets for which the U.S. Commodity Futures Trading Commission (“CFTC”) has permitted the trading of an exchange-listed futures contract. The Fund expects to invest substantially all of its net assets in the spot digital asset commodities underlying these futures contracts as well as in futures and derivative products based on, and/or derived from the digital asset commodities. The assets of the Fund will be both exchange-listed and/or traded over-the-counter globally.
Funds not otherwise invested, including reserves for collateral and redemptions, are expected to be held in USD or USD-like products, including stablecoins like USDC and U.S. Treasury securities.
Superstate Inc., a Delaware corporation (the “Investment Manager”), is the investment manager of the Fund. The portfolio managers of the Investment Manager are Robert Leshner, CFA and Jim Hiltner, CFA.
Detailed Holdings
As of December 13, 2024, the table below outlines the current holdings. Full details are available on USCC’s Fund page.
| Asset | Quantity | Implied Yield | Notional Value | Portfolio % |
|---|---|---|---|---|
| USDC | 0.02 | 0.00% | $0.02 | 0.00% |
| USTB | 861,726.82 | 4.63% | $9,016,948.34 | 9.47% |
| Bitcoin (Custody) | 170.48 | 0.00% | $18,343,318.08 | 19.27% |
| Bitcoin (Collateral) | 115.56 | 0.00% | $12,434,252.76 | 13.06% |
| Ether (Custody) | 366.33 | 0.00% | $1,494,258.96 | 1.57% |
| Ether (Collateral) | 2,049.20 | 0.00% | $8,358,686.80 | 8.78% |
| Ether (Staked) | 10,080.00 | 2.87% | $41,116,320.00 | 43.20% |
| Liquid Collective Staked Ether (lsETH) | 1,014.27 | 3.06% | $4,410,273.88 | 4.63% |
| ETH Forward 27DEC24 | -8,720.00 | 18.37% | -$35,760,720.00 | -37.57% |
| ETH Forward 31JAN24 | -1,350.00 | 15.46% | -$5,613,300.00 | -5.90% |
| ETH Forward 28MAR25 | -2,301.00 | 14.83% | -$9,773,727.60 | -10.27% |
| ETH Forward 27JUN25 | -1,000.00 | 13.92% | -$4,378,600.00 | -4.60% |
| BTC Forward 20DEC24 | -20.00 | 17.52% | -$2,155,840 | -2.27% |
| BTC Forward 27DEC24 | -166.38 | 18.67% | -$18,000,652.20 | -18.91% |
| BTC Forward 28MAR25 | -90.15 | 14.63% | -$10,095,537.90 | -10.61% |
| Portfolio | 17.28% |
Income
Income generated by the Fund will be accumulated and reinvested by the Fund. There are not expected to be any distributions or dividends to the shareholders other than redemptions of Fund Shares.
Yield accrues to Fund NAV, determined as of the close of regular trading (17h ET) on each day that both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open.
USCC Investor Eligibility
USCC is only open to Qualified Purchasers who must be KYC’d. Finres has already been deemed eligible to invest in this fund.
KYC/AML Compliance and Whitelist
The Fund and USCC tokens are available to “whitelisted” (aka Allowlist) investors who have passed checks for suitability, AML/KYC verification and register their corresponding addresses. Only the whitelisted users can subscribe for or acquire tokens on the secondary market. The Allowlist address check is part of the USCC token’s code and occurs each time a transaction is attempted. If the receiving or sending address is not present on the Allowlist, the transaction will fail.
Legal / Operational Details
Legal Structure
USCC is a separate series of Superstate Asset Trust (a Delaware Statutory Trust). USCC is a private fund pursuant to Section 3(c)(7) of the Investment Company Act. USCC is only available to a limited subset of potential investors that meet the criteria outlined in the Private Placement Memorandum. Investors must undergo AML, KYC, and sanctions compliance checks.
Fund Mechanics
Investors may purchase Shares of USCC via USDC or USD (“cash”) which may be issued in the form of ERC-20 tokens. This tokenized ownership is composable and transferable where one Share is represented by one USCC token on Ethereum. Transferring the USCC token effectively transfers ownership of the underlying share of the Fund. Investors who complete onboarding may identify Ethereum addresses to an AllowList, a smart contract managed by Superstate Inc. that approves KYC’d entities to interact with USCC tokens.
Investors may redeem Shares of USCC by burning USCC tokens (sending them back to the token contract address) and receive either USDC or USD (“cash”).
AUM, NAV per Share, transparent holdings, yield, and more are available via USCC’s Fund page.
Purchases and Redemption
Purchases
Investors can purchase USCC by either transferring USDC to a client-specific USCC Purchase Address (which is a Circle deposit address) or by initiating a bank wire to USCC’s custodian with a unique memo attributing the purchase to the investor.
- If funds are received before 5:00 PM ET on a Market Day, the investor will receive USCC at that Market Day’s closing NAV/Share, minted shortly after 9:00 AM ET.
- If funds are received after 5:00 PM ET, the investor will receive USCC at the next available NAV/Share, shortly after 9:00 AM ET on the next Market Day.
Purchases are viewable in the Investor Portal, and you will receive confirmation emails when a purchase has been initiated and completed. Gas fees to transfer USDC or bank fees to wire U.S. Dollars for purchases are the responsibility of the investor.
Redemptions
Investors can redeem from USCC by either transferring USCC to the token contract or by calling the burn() function on the token.
- If a redemption request is received before 5:00 PM ET on a Market Day, tokens/shares will be redeemed at that Market Day’s closing NAV/Share. The investor will receive USDC or USD the next day (T+1).
- If a redemption request is received after 5:00 PM ET on a Market Day, tokens/shares will be redeemed at the next Market Day’s closing NAV/Share. The investor will receive USDC or USD the next day (T+2).
Redemptions are viewable in the Investor Portal, and you will receive confirmation emails when a redemption has been initiated and completed. Gas fees to transfer USCC to the token contract address are the responsibility of the investor.
Yield Considerations
USCC shares may be issued as a yield-bearing ERC-20 token, USCC token, or as Book Entry shares. Each USCC token is one share in USCC, and the number of shares issued (USCC tokens minted) is equal to the Purchase Amount ($) divided by the Net Asset Value per share (NAV/S) on a given Market Day. Market Days are when both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open.
USCC token has 6 decimal places, with 1.000000 (1e6 on Ethereum) representing one unit of USCC. The NAV/S started at $10 and changes daily due to the Fund’s underlying performance. NAV/S is calculated by a reputable third party, NAV Fund Services, by dividing the total Assets Under Management (AUM) by the total number of shares in the Fund. This calculation occurs once per market day and reflects the price per share of USCC based on its underlying asset prices.
Investors redeeming USCC may elect to receive USDC or USD equivalent to the number of shares/tokens times the NAV/S on a given Market Day. USCC functions similarly to Lido’s wstETH, where your token balance remains static unless you mint, burn, or transfer. The NAV/S increases over time, allowing investors to redeem a share of USCC for an increasing amount of U.S. Dollars or USDC.
Fees
USCC’s fees include 1) Management Fee, 2) Fund Operating Expenses, and 3) Other Fees.
Note: These fees and expenses are outlined explicitly in the Fund’s Private Placement Memorandum and Investor Agreement.
- Superstate Inc.’s standard fees include a 0.75% Management Fee for providing investment management services.
- Fund Operating Expenses include but are not limited to, administrative, audit, custody, financial statement preparation, and Circle Internet Financial fees
- Other Fees include any expenses not expressly the responsibility of the Investment Manager.
- a) Superstate Inc. does not charge any subscription or “minting” fees
- b) Investors are responsible for paying gas fees when “burning” USCC tokens.
- c) Superstate Inc. does not charge any fees for redeeming from the fund
- d) There are no fees for redeeming Book Entry shares
Investor Portal
Our easy-to-use Investor Portal helps you track and manage your investments in Superstate Funds. The Investor Portal has three sections:
- Portfolio: View your holdings, purchase and redeem instructions, and your transactions.
- Documents: View key Superstate Funds documents.
- Settings: Manage your Organization and Entity settings. Your organizational settings include your team, while each Investing Entity includes a section for applications, purchase destination, payout destination, and address.
Service Providers Overview
Investment Adviser: Superstate, Inc.
Superstate Inc., the Fund’s Investment Adviser, is currently an Exempt Reporting Adviser (“ERA”) with the U.S. Securities and Exchange Commission (“SEC”) in reliance on the private fund adviser exemption under the Investment Advisers Act of 1940 (“Advisers Act”). Information about Superstate Inc. can be found by visiting the SEC website and searching for our firm name.
Superstate Inc. also develops proprietary technology (both onchain and off-chain) for the Fund.
Custodian: Anchorage Digital Bank N.A
All crypto and stablecoins in the Fund are held in a segregated custodial account in the name of USCC at Anchorage Digital Bank N.A ((the only federally chartered crypto bank), USCC’s Custodian.
Anchorage Digital Bank NA is a federally chartered digital bank that offers a comprehensive suite of financial services designed to bridge the gap between traditional finance and the rapidly evolving digital asset ecosystem. As a national bank, Anchorage operates with the regulatory oversight of the U.S. Office of the Comptroller of the Currency (OCC), providing clients with the security and trust of traditional banking, while specializing in the unique needs of institutional clients dealing with cryptocurrencies and digital assets.
NAV Calculation Agent: NAV Fund Services
Based on USCC’s holdings, trading activity, and inflows/outflows, NAV Fund Services calculates the Fund’s Net Asset Value (“NAV”) each Market Day. The NAV is delivered daily to Superstate via API which is then displayed on our website and used to determine the price for purchases and redemptions. NAV Fund Services is committed to rapid data delivery and offers overnight fund administration, with over $300B in assets under administration (“AUA”) across hundreds of other asset managers.
Auditor: Ernst & Young LLP
Superstate has contracted with a top-tier audit firm to provide independent annual assessments of the Fund’s financial statements and added transparency for our investors.
Ernst & Young LLP (“EY”) is one of the world’s largest accounting firms and is considered one of the ‘The Big 4’, providing global tax, audit, and advisory services to thousands of clients. EY audits USCC annually to ensure accurate financial reporting.
USDC Services: Circle Internet Financial
Investors can choose to purchase shares with USDC. To facilitate this service, Superstate Asset Trust has contracted with Circle Internet Financial (“Circle) to perform USDC mint/burn services as a convenience to shareholders.
[ircle will convert USDC to US Dollars (“USD”), and vice versa, for purchases and redemptions into and out of the Fund.
About Superstate
Superstate:
Superstate is an asset management firm modernizing investing through tokenized financial products. We offer investment products that benefit from the speed, programmability, and compliance advantages of blockchain tokenization. Superstate’s suite of products currently includes a tokenized T-Bill fund ([USTB] / see forum post), and a tokenized crypto cash and carry fund (USCC) collectively Superstate Funds.
Key Personnel Biographies
Robert Leshner, CFA Co-founder and CEO
Robert is a serial entrepreneur and previously co-founded Compound Labs. Robert has been directly responsible for designing smart contracts such as Governor Bravo and the ERC-7246 token standard, Encumber. Robert is the former chair of the San Francisco Revenue Bond Oversight Committee and is a Chartered Financial Analyst. Additionally, he is a venture investor at Robot Ventures and co-hosts The Chopping Block, a crypto-native podcast.
Reid Cuming, Co-founder and COO
Previously, Reid was the VP and GM of Compound Treasury. Before Compound, Reid was Head of Product at Chime and led product management at Stripe and Block (f/k/a. Square), building new products and infrastructure including Stripe Identity and Square’s machine learning platform. He is a former restructuring consultant and current angel investor and venture scout for Greylock.
Jim Hiltner, CFA, Co-founder and Head of Business Development
Previously, Jim was the Director of Sales at Compound Treasury, and held senior sales leadership and go-to-market roles in early-stage FinTech companies, including as a VP at Pagaya where he managed bank, FinTech, and card network partnerships, and as the Director of Sales at Visible Alpha where he was the first commercial team member responsible for building the institutional client base. Jim graduated with a double major in Finance and Management with a minor in Math from the University of Miami (FL) and is a Chartered Financial Analyst.
Alexander Zozos, General Counsel
Alex has worked on blockchain securities for >7 years. Alex served as a Special Counsel at the SEC where he contributed to the FinTech Working Group and focused on secondary trading of digital assets. Immediately before joining Superstate, Alex worked as Associate General Counsel at Coinbase where he worked closely with the MakerDAO community on ratifying MIP81 – Coinbase USDC Institutional Rewards) in addition he focused on Coinbase’s tokenization, brokerage, and derivatives exchange legal initiatives.
Jonathan Walch, Head of Engineering
Previously, a core engineer at Frax Finance and a smart contract auditor at Macro. He identified significant vulnerabilities in MakerDAO, Sommelier Finance, and Thirdweb. Jonathan serves as a technical advisor for crypto startups. Additionally, Jon is a former CTO, founder, and engineering leader, beginning his career at Morgan Stanley.
Voting:
- For: Invest USD or USDC reserves in USCC to back Frax USD with an initial cap of $20mm.
- Against: Do nothing.
Supplementary Documents
General