Ethena Launches Stablecoin Backed by BlackRock’s BUIDL Fund

Ethena Labs, the startup behind the USDe synthetic dollar, has added another stablecoin to its product offerings.

According to the company, UStb will function “identically” to a traditional stablecoin and will have its reserves invested in Blackrock’s tokenized asset fund, BUIDL. The fund itself has investments in short-term U.S. T-bills and repurchase agreements.

“UStb can also help USDe better weather difficult market conditions,” claims a press release from Ethena Labs shared with The Defiant. To do so, and depending on Ethena’s governance structure, during periods of negative funding, the company can close hedging positions underlying USDe and reallocate its reserve assets to UStb. Crypto investors and users can also use UStb as margin collateral on exchanges that support USDe, such as Bybit.

Notably, the market capitalization of USDe, Ethena’s flagship product, fell slightly today by $13 million to $2.54 billion.

Stablecoin Wars

Today’s announcement tacks onto a long list of new stablecoins hitting the market.

Ripple recently announced its own stablecoin, dubbed RLUSD, which has been rolled out on XRPLedger and Ethereum since early August, and PayPal recently enabled PYUSD for cross-border payments.

The stablecoin market has been growing rapidly, with a current market capitalization of $173 billion. However, it’s mostly dominated by two stablecoins, USDT and USDC, which collectively command more than 90% of the entire sector.

Newly launched stablecoins aim to attract some of that capital into their own products.

Controversial Launch

Ethena Labs unveiled its flagship product, USDe, in February, which stirred a hefty controversy due to its innovative architecture and a whopping 27% yield – although this has since dropped to 10%.

The “synthetic dollar” known as USDe is collateralized with crypto assets, primarily staked Ethereum (stETH), and corresponding short futures positions on centralized exchanges. The high initial yield triggered PTSD from the still-fresh memory of UST and LUNA, which took down the entire crypto economy when they collapsed.

However, many crypto pundits have come out defending USDe, claiming it is the first innovation in the realm of stablecoins in years. So far, the peg has been solid, with a few small spikes in its very early days.