USD3 is an overcollateralised, yield-bearing USD stablecoin targeting DeFi’s risk-adjusted rate. Yield from its collateral basket is split between USD3 holders and stRSR, with holder returns realised through NAV appreciation.
The purpose of this report is to inform and educate the wider Reserve community on USD3 activity, while serving as a reference library for governance and on-chain data. A secondary aim is how this data can drive and direct action amongst stakeholders over the next quarter.
Summary
- Q1 marked a significant contraction phase for USD3, with market cap declining from $35.3m to $6.5m and total TVL from $39.6m to $7.3m
- Yield compressed across the basket, falling from 4.1% to 3.06%, reflecting broader rate declines across DeFi venues
- The collateral basket remained unchanged since June 2025, with equal 25% allocations across four strategies and a diversification score of 75%
- DeFi supply fell to $226k and is now fully concentrated on Curve following the exit from lending markets
- The sunset of Gauntlet’s USD3 vault on Morpho removed a key distribution venue and source of demand
- Curve liquidity declined across all pools, with scrvUSD falling from $1.79m to $343.8k, sUSDe from $1.00m to $91.1k and sUSDS from $1.03m to $131.8k
- RSR backing increased slightly from 13% to 14%, primarily driven by the reduction in outstanding supply
- Governance activity remained active, including the successful upgrade to v4.2.0 and the reallocation of 3% revenue back to stRSR
Full Report
The tables in this report do not include Q4 2025 data or quarter-on-quarter deltas, as no USD3 report was published for Q4 and a consistent baseline was unavailable. Metrics are therefore compared against Q3, with some changes to data points and methodology limiting direct comparability. Section summaries do provide context where relevant, though this is not reflected in the tables. This will be resolved in the Q2 report cycle with aligned datasets and full quarter-on-quarter comparisons.
USD3 Headline Metrics
Q1 shows a sharp contraction across most core metrics when compared to Q3 2025, with market cap falling from $35.3m to $6.5m and total TVL from $39.6m to $7.3m. Yield has also compressed, with basket yield at 3.06% versus 4.1% in Q3 reflecting yield contraction amongst DeFi venues. RSR staking yield is also down from 4.7% to 3.7%.
The primary driver of this contraction is the near-complete removal of incentives across USD3 DeFi markets, which has led to the exit of mercenary capital and a reset in baseline demand. One relative bright spot is RSR backing, which has increased slightly from 13% to 14%. However this is largely due to the reduction in outstanding supply rather than new capital inflows.
Current USD3 Collateral Basket
The USD3 collateral basket remains evenly distributed across four core USDC-based strategies, each allocated 25%, resulting in a blended yield of 3.06% and a strong diversification profile. However, the basket has not been actively optimised since July 2025, which may be contributing to the observed decline in yield. That said, the primary driver remains broader yield compression across DeFi, as base rates have fallen across lending and savings venues. In this context, the current basket continues to provide stable, diversified exposure, which tracks DeFi’s risk adjusted rate, but there is a clear opportunity for optimisation to better capture available yield going forward.
Token Holder and Transfer Metrics
DeFi Integrations
DeFi supply has contracted sharply in Q1, with total supply falling to $226k and now entirely concentrated within Curve. This marks a significant decline from Q3 2025 levels, where USD3 was more broadly distributed across Morpho and Curve venues. The primary driver of this contraction is the near-complete cessation of incentives, which has led to the exit of mercenary capital across all major integrations. The sunset of Gauntlet’s USD3 vault on Morpho has further removed a key source of demand, leaving USD3 without a meaningful presence in lending markets.
This contraction is also clearly reflected across Curve liquidity. The USD3/scrvUSD pool has fallen from $1.79m to $343.8k, the USD3/sUSDe pool from $1.00m to $91.1k, and the USD3/sUSDS pool from $1.03m to $131.8k. While liquidity remains distributed across these pools, overall depth is now significantly reduced, with current levels better representing organic demand in the absence of incentives.
Curve
Governance
USD3 4.2.0 Upgrade
Summary: Upgrade all USD3 core contracts and assets from version 3.4.0 to version 4.2.0. This new version of the software includes updates from 4.0.0, 4.1.0, and 4.2.0.
RFC: 2 unique commenters. Poll: 3 FOR / 0 AGAINST
IP: Passed with 240% quorum. Vote: 3 FOR / 0 AGAINST
Return of external revenue to RSR Stakers
Summary: This proposal returns 3% of the Rev Share distribution that is directed to Sawyer as DTF Champion back to stRSR following his exit. The first IP for this proposal failed due to it occurring over a weekend. A second IP following the usual governance cadence was promptly proposed, this IP passed efficiency, reaching 240% quorum.
RFC: 2 unique commenters.
IP: Passed with 240% quorum. Vote: 3 FOR / 0 AGAINST
Implications for Governors
The removal of incentives has reset USD3’s positioning, with current supply and liquidity now reflecting organic demand. This provides a clearer baseline for evaluating product market fit, but also highlights limited distribution and demand.
The lack of basket optimisation since mid 2025 is now more visible in a lower yield environment. While broader rate compression remains the main driver, there is an opportunity to improve performance through active collateral management.
The loss of Morpho as a distribution venue is a key constraint. With USD3 now reliant on Curve, if incentive scope allows, re-establishing lending market integrations should be a priority to support scale and utility.
Finally, while RSR backing remains stable, the reduced system size limits overall revenue generation, reinforcing the need to rebuild supply and integrations.
Conclusion
Q1 represents a transition period for USD3, moving from an incentivised growth phase to a more sustainable, organic baseline. While this has resulted in sharp declines across supply, liquidity and yield, it also provides a clearer view of underlying demand and system resilience.
The current basket continues to deliver stable, diversified exposure to DeFi’s risk-adjusted rate, but has not been actively managed in line with changing market conditions. Combined with reduced distribution across DeFi, this has contributed to a weaker overall yield and growth profile.
Looking ahead, the focus should shift toward re-establishing distribution, optimising the collateral basket and selectively reintroducing incentives where they can drive efficient and sustainable growth.