Macauley Peterson

Cap Labs’ new stablecoin cUSD has seen rapid adoption since launch, climbing to $67.85 million in circulation over the past week, <a href="https://defillama.com/stablecoin/cap-cusd">according</a> to DefiLlama. 



Etherscan <a href="https://etherscan.io/token/0xcccc62962d17b8914c62d74ffb843d73b2a3cccc">shows</a> 2,735 holders of the token to date. The jump signals strong demand for Cap’s yield-layered digital dollar model, which combines regulated reserve assets with EigenLayer-powered credit underwriting.



Built atop the newly launched Cap Stablecoin Network (CSN), cUSD is designed as a 1:1 redeemable stablecoin backed by assets like <a href="https://blockworks.co/tag/paypal">PayPal’s</a> <a href="https://blockworks.co/price/pyusd">PYUSD</a>, <a href="https://blockworks.co/tag/blackrock">BlackRock</a>-managed <a href="https://blockworks.co/news/buidl-collateral-tokenization">BUIDL</a>, and <a href="https://blockworks.co/tag/franklin-templeton">Franklin Templeton’s</a> BENJI. The yield-bearing version stcUSD — minted by staking cUSD — is enabled by a three-party system of lenders, operators, and restakers.



Cap’s core innovation lies in its structure: operators borrow stablecoins to deploy yield strategies, restakers underwrite the operator’s credit risk, and lenders (stcUSD holders) earn a floating yield, currently around 12%, depending on market demand and operator performance. While restaker collateral provides protection against operator default, stcUSD holders are still exposed to fluctuating yield dynamics.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcu_7EBXZi3VItlG_gUlP9ZdT_spy2QXjOEzbUMHu7GkZFHRrKyJZ9-tlygRXK5q_omNcVAeG6WuoQ6iSAgmzzZFOSBYsP0chFvaZY1O5vP7YJeK2iehw-MHotrGOt4ZVsJb5OyEA?key=1HSKtor9sNS05yY8kpZnCg" alt=""/><figcaption class="wp-element-caption">cUSD’s impressive growth; Source: <a href="https://defillama.com/stablecoin/cap-cusd">DefiLlama</a></figcaption></figure>



Unlike many past stablecoin launches, Cap’s model is carefully tuned to comply with the <a href="https://blockworks.co/tag/genius-act">GENIUS Act</a>, the sweeping US stablecoin legislation that prohibits interest-bearing payment tokens. Speaking at the Stablecoin Summit in Cannes <a href="https://youtu.be/fxd5wXtAaC8?si=45kDRI1mmi8Zt56U">in June</a>, Cap Labs founder Benjamin Lens was blunt:



“They said no yield, and it’s pretty clear — there’s no way around it. They do not want stablecoins giving yield to retail investors,” Lens said.



Thus, stcUSD is a separate <a href="https://blockworks.co/tag/erc-4626">ERC-4626</a> vault token, which users can mint by staking cUSD. The yield is generated through a marketplace of borrowing and restaking, not directly from Cap Labs.



“Genius Act covers companies that are generating yield on behalf of users and giving them to the users,” Lens said in Cannes, whereas Cap is “an immutable open protocol like <a href="https://blockworks.co/tag/ethereum">Ethereum</a>, like Bitcoin.”



Combined with the fact that the percentage of any one stablecoin backing cUSD is limited to 40%, Lens thinks they have a compliant mechanism. “This is the standard that we&#8217;ve agreed to with Templeton and BlackRock for our integration with them,” Lens told Blockworks, noting it’s the same arrangement that UStB (from Ethena) made in partnership with BlackRock.



<h2 class="wp-block-heading">Restaking evolution</h2>



Cap’s design aligns with a trend emerging on <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>: the financialization of Actively Validated Services (AVSs). Traditionally, AVSs on EigenLayer offered infrastructure services — like oracles or bridges — with risk limited to uptime or correctness. But a new wave of AVSs is using EigenLayer to underwrite financial guarantees.



Cap is one example highlighted by EigenLayer founder Sreeram Kannan. “A staker can stake and promise that an operator [like Susquehanna] is going to make a 10% APR,” Kannan told Blockworks. “You can underwrite financial risk using EigenLayer, which is a very new kind of risk, which requires much, much more active curation and monitoring,” he said.



What makes this possible is EigenLayer’s recent rollout of a new feature, complementary to slashing, which <a href="https://blockworks.co/news/restaking-use-cases-reframed">went live in April</a>.&nbsp;



While slashing enables restakers to be penalized for backing underperforming operators, <a href="https://docs.eigencloud.xyz/products/eigenlayer/concepts/slashing/redistribution">redistribution</a>, launched in late July, allows slashed funds to be redirected back to the impacted AVS — such as Cap’s lending vault — rather than burned.



That change turns EigenLayer into a programmable risk distribution layer, capable of enforcing structured finance contracts entirely onchain.



“With financial AVSs, slashing is the core logic,” Kannan said. “A liquidation is an example — if the hurdle rate is not met — slash and move the money out.” That’s easier than slashing some infrastructure AVSs like a ZK or TEE coprocessor, where it’s harder to adequately express the slashing logic onchain, he added.



According to a research note from Serenity Research and Catalysis <a href="https://serenityresearch.substack.com/p/serenity-premium-cap-money-and-cusd">published</a> Sunday, Cap’s model resembles a CDS-like structure: Restakers sign off-chain legal agreements to cover operator defaults, post collateral onchain, and are liquidated if their guarantee fails. Cap currently lists market makers like Fasanara, GSR, and Amber as operators, with Gauntlet and <a href="https://blockworks.co/tag/symbiotic">Symbiotic</a> restakers providing credit protection.



Cap Labs’ operating company, which handles smart contracts, social media and frontend, is based in Panama, Lens said.



“There are currently no plans to geofence the US. Since we&#8217;re functionally an autonomous, overcollateralized lending market, we&#8217;re taking a similar precedent to <a href="https://blockworks.co/tag/aave">Aave</a> and <a href="https://blockworks.co/analytics/morpho">Morpho</a>,” he said.



As Cap’s model gains traction, it could preview a broader shift in the restaking ecosystem: from securing infrastructure to enabling onchain credit underwriting, with slashing and redistribution forming the enforcement rails for next-gen financial AVSs.



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