Ethena Labs Launches New Stablecoin Backed by BlackRock

Ethena Labs has introduced a new stablecoin called UStb, separate from its existing USDe stablecoin. The newly launched UStb is backed by BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) and Securitize's tokenized fund, offering a different risk profile compared to USDe. This addition aims to provide exchange partners and users with an alternative collateral option.

We are excited to announce Ethena's newest product offering: UStb

UStb will be fully backed by @Blackrock BUIDL in partnership with @Securitize, enabling a separate fiat stablecoin product alongside USDe

Details below on why this is important: pic.twitter.com/jOIoMef7W3 — Ethena Labs (@ethena_labs) September 26, 2024

The company announced this launch on Thursday through a post on X (formerly Twitter), noting that UStb will work similarly to a traditional stablecoin. However, UStb will remain distinct from USDe, which uses a delta-neutral strategy to maintain its dollar peg. In contrast, UStb focuses on being a fully collateralized product.

Ethena’s decision to introduce UStb may be driven by community concerns regarding USDe's performance during negative funding rate periods. USDe's strategy relies on maintaining both long and short positions in Bitcoin and Ethereum to generate returns. When funding rates turn negative, this can lead to concerns over its stability.

Funding rates are periodic payments made between perpetual contract traders to balance market prices. A negative funding rate indicates that short sellers must compensate long holders, creating potential vulnerabilities. Ethena has stated that despite these market fluctuations, USDe has not faced significant negative funding issues over the last six months.

Ethena Labs hinted that if funding conditions worsen, it could be forced to shut down USDe's hedging positions and convert all reserve assets into UStb to safeguard against potential risks. This would help the protocol mitigate losses during adverse market scenarios.

Recently, Ethena’sfront-end system was hacked, but the breach didn’t impact the protocol itself or user funds. This security incident highlighted the need for continuous security enhancements, especially with the expansion of new products like UStb.

In summary, the launch of UStb is a strategic move by Ethena to diversify its product offerings, reduce risks linked to USDe, and provide users with a stable, fully collateralized alternative. The team aims to expand UStb to other centralized exchanges, increasing its availability and usability as a reliable, risk-managed stablecoin choice.