Ethena, a decentralized finance (DeFi) platform, is set to launch a new stablecoin named UStb in partnership with the real-world asset tokenization platform, Securitize.
UStb is designed to operate like traditional stablecoins, but with a key difference: its reserves will be invested in BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), a tokenized investment on the Ethereum blockchain.
This fund primarily invests in U.S. dollars, short-term U.S. Treasury bills, and repurchase agreements, which provides a more stable and diversified approach compared to many other stablecoins on the market.
Backing and Risk Management
BlackRock’s BUIDL fund, launched in March 2023, has grown rapidly, amassing over $522 million in assets under management (AUM). It has become the largest tokenized U.S. Treasury fund in the market, reflecting the growing demand for tokenized government securities. According to data from asset management firm 21.co, the total market for tokenized government securities has surpassed $2 billion.
Securitize, a platform known for its involvement in tokenizing investments, manages over $950 million in tokenized assets across major funds, including BlackRock, Hamilton Lane, and KKR.
UStb as a New Offering
While UStb offers stability through its backing by BlackRock’s fund, it is designed to operate independently from Ethena’s existing stablecoin, USDe. The USDe, which launched in February, differs from traditional stablecoins in that it uses derivative hedging strategies rather than being directly backed by fiat or physical assets. The USDe stablecoin relies on a mixture of cryptocurrencies such as ether (ETH), bitcoin (BTC), and solana (SOL) as collateral and maintains its peg through an arbitrage-based minting and redeeming system.
However, USDe carries certain risks, including exposure to volatile derivatives markets and the performance of its crypto-backed reserves. It briefly lost its peg in August 2023 during a crypto market downturn, dipping to $0.997 before recovering.
In response to such risks, Ethena Labs views UStb as a way to bolster the USDe stablecoin. According to Ethena’s team, during periods of unfavorable market conditions, assets backing USDe can be reallocated to UStb to help stabilize the system.
A Diversified Approach
Ethena’s new UStb will be available as an alternative form of collateral on centralized exchanges such as Bybit and Bitget, where traders can use it for margin trading. This provides users with a lower-risk option compared to USDe, which is exposed to more volatile market conditions due to its reliance on derivatives and cryptocurrency collateral.
Ethena’s development has attracted notable support, with the company raising $14 million in a strategic funding round led by Dragonfly Capital and Arthur Hayes’ family office, Maelstrom, earlier this year. Ethena’s total valuation now sits at $300 million.
