Sky’s $4.4 billion liquidity disclosure shows why USDS cash-outs need a separate bank route

Sky.money reported more than $4.4 billion of stablecoin liquidity in its Peg Stability Module in an Oct. 9 explanation of the conversion mechanism. The PSM gives holders a direct route between USDS, Sky Protocol’s dollar-linked token, and USDC at a one-for-one rate.

Those measures answer different questions. Token circulation describes the stock of holdings. Conversion inventory describes what a holder can receive on a particular exit route. Fresh external dollar demand concerns money entering from outside the token system. Borrowing against collateral and upgrading an existing token can change individual token counts without establishing a matching inflow of bank dollars. A swap through existing inventory moves liquidity between holders or token forms; it does not by itself establish new issuance.

Sky describes direct USDS–USDC conversion in both directions through liquidity already held inside the protocol. The mechanism supplies the conversion itself, so it does not need to find another trader willing to take the opposite position.

At the settings described in the October explanation, the direct PSM leg has no protocol swap fee or slippage. A routed trade can still incur costs elsewhere: if it passes through another token pool before reaching USDC or USDS, that leg follows the pool’s own pricing, liquidity and fees.

The $4.4 billion figure describes aggregate stablecoin liquidity disclosed on Oct. 9. A USDS exit depends on the USDC inventory available on that route at the time of the transaction.

Sky also reported about $1.6 billion in cumulative USDC–USDS volume processed through Uniswap routing by Oct. 6, following its July 8 integration. Cumulative turnover can include movement in both directions and repeated conversions; it does not measure net USDS issuance or new dollars deposited into crypto.

A separate Ethereum converter connects DAI and USDS. Sky’s developer documentation says the two tokens share an issuance source and that holders can convert between them in either direction without liquidity restrictions. That statement applies to the DAI–USDS converter, rather than to the availability of USDC in the PSM.

The accounting implication is straightforward: a holder can change an existing position’s denomination. An increase in USDS considered alone therefore need not represent additional money entering the wider system. Understanding the economic change requires following the DAI side of the conversion as well.

USDD is a separate collateral-backed stablecoin whose borrowing and migration routes add two more ways a token count can change. Its vault documentation describes depositing collateral, minting USDD debt and repaying the tokens plus stability fees to release collateral. Users can also withdraw collateral while maintaining sufficient coverage. This creates spendable liquidity for someone who wants to retain a collateral position, alongside an obligation to repay.

The borrower’s new ability to transact is economically useful. It can be created against assets already held, however, so each newly issued token does not require a corresponding new bank-dollar deposit. The pledged assets support the debt; their valuation is a different measure from the stablecoin inventory available to satisfy an immediate conversion request.

USDD also offers a migration route from USDDOLD into an equivalent amount of new USDD, with gas costs and no deadline. Here, a higher count in the new token can reflect an upgrade of an existing holding. Comparing old and new contracts separately can obscure whether the underlying economic position has increased.

A supply comparison needs consistent observation times and stated token coverage, including how it treats legacy tokens and holdings that back other tokens.