Fiat Collateral and U.S. Market Exposure

Strategic Diversification and Management of U.S. Dollar Exposure

Delta Money employs a sophisticated fiat reserve framework to ensure liquidity, optimize yield, and reduce concentration risk. This diversified strategy is designed to support DUSD’s peg, safeguarding the protocol against market volatility while maintaining flexibility for growth in emerging economies.

Fiat Collateral Structure

High-Quality Liquid Assets (HQLA) Allocation for Stability and Yield

To back DUSD issuance, Delta allocates its fiat reserves primarily in short-duration U.S. Treasuries, cash/overnight repo instruments, and strategic participation in repo markets in emerging economies. This allocation ensures capital preservation while generating stable returns across both developed and emerging market landscapes.

Reserve Composition (Illustrative Allocation – $1 Billion Fiat Portfolio):

Instrument Type	Allocation	Value (USD)	Yield (APY)
U.S. Treasury Bills (0–3 mo)	60%	$600M	4.7%
Cash & Overnight Repo	30%	$300M	5.0% (repo)
Emerging Market Repo (BRL, KZT)	10%	$100M	6.0%
Total Fiat Collateral	100%	$1B	Blended ~4.9%

Note: Allocation ensures liquidity for DUSD redemptions while optimizing yield across market cycles, with added exposure to emerging market repo markets for enhanced returns.

U.S. Market Exposure

Liquidity and Yield from the World’s Deepest Treasury Market

Delta’s exposure to U.S. markets is primarily in short-dated U.S. Treasuries and overnight reverse repos. These instruments offer:

• High liquidity for daily operations

• Minimal duration risk

• Stable yield across interest rate cycles

This positions Delta Money’s fiat reserves in risk-free U.S. dollar assets, ensuring operational stability and liquidity for DUSD redemptions.

Emerging Market Exposure

Dynamic Exposure Based on Demand from Emerging Economies

Delta Money’s exposure to emerging markets is not capped, and the protocol adjusts this exposure dynamically based on demand from clients in these regions. In response to market interest and client needs, Delta may allocate capital into sovereign bonds or central bank-backed instruments in emerging market currencies such as the Kazakhstani Tenge (KZT) and Brazilian Real (BRL).

Additionally, Delta participates in repo markets in emerging economies, such as those in Brazil and Kazakhstan. This participation allows Delta to earn yield from short-term, liquid collateral, while simultaneously increasing market engagement in these regions.

These investments are actively hedged through forward contracts, non-deliverable forwards (NDFs), options, and futures to mitigate currency and market risks.

The exposure increases or decreases dynamically in alignment with demand, ensuring that Delta can provide liquidity and yield to clients without risking the stability of the collateral base.

Example: EM Sub-Allocation (Responsive to Client Demand)

Currency	Allocation	Instrument Type	Hedged Yield (Net)
BRL	$150M	Brazilian NTN-B (short-term)	6.1%
KZT	$120M	Kazakhstan NB Notes (≤1 yr)	5.4%
BRL Repo	$30M	Repo Market (Brazilian Assets)	6.0%
KZT Repo	$50M	Repo Market (Kazakh Assets)	6.0%
Total EM Exposure	$350M	-	-

Exposure adjustments are made dynamically based on client demand, with full FX hedging in place using options, futures, forward contracts, and NDFs to minimize volatility.

Strategic Objectives

• Ensure high liquidity for instant redemptions

• Preserve capital across different interest rate environments

• Generate stable income to reinforce the Insurance Fund and support protocol solvency

• Adapt exposure to emerging market assets, including repo markets, in response to client demand, while managing currency risk through hedging strategies