BlackRock’s BUIDL Fund Backs Ethena’s New Stablecoin

Ethena Labs has announced the upcoming launch of UStb, a new stablecoin that will be backed by the BlackRock USD Institutional Digital Liquidity Fund (BUIDL).

BlackRock’s BUILD is a tokenized fund on the Ethereum blockchain, positioning it at the forefront of the real-world asset (RWA) revolution.

How UStb Might Solve Shortcomings of USDe

UStb aims to mirror the stability of traditional stablecoins, incorporating a novel approach by anchoring its value in BUIDL. This fund comprises US dollars, short-term US Treasury bills, and repurchase agreements. Impressively, since its launch in March, BUIDL has accumulated over $513 million in assets, establishing itself as the largest tokenized US Treasuries fund.

The market for tokenized government securities has expanded significantly, now surpassing $2.22 billion. This growth highlights the rising confidence in blockchain-enabled financial solutions.

Read more: A Guide to the Best Stablecoins in 2024

Collaborating with Securitize, Ethena plans to enhance the stablecoin market. Securitize currently oversees more than $950 million in tokenized investments and has played a crucial role in tokenizing funds for BlackRock.

Distinctively, UStb offers a different risk profile compared to Ethena’s existing USDe stablecoin. Launched earlier this year, USDe quickly climbed to become the fifth-largest stablecoin by market cap, with a current supply of $2.55 billion.

Contrary to USDe, which relies on a mix of cryptocurrencies and derivative strategies for stability, UStb provides a relatively safer investment alternative by backing it directly with low-risk, liquid assets. USDe had some challenges, such as the risk of losing the peg if the funding rate turns negative for a prolonged period of time.

Through this new stablecoin, Ethena Labs aims to solve some of the shortcomings of USDe.

“If governance deems it necessary and appropriate in negative funding conditions Ethena can close hedging positions and re-allocate those backing assets to UStb to further ameliorate risk associated with negative funding rate environments,” Ethena Labs explained.

This innovation arrives at a transformative moment for Ethena. Following the stablecoin’s reveal, Ethena’s native token, ENA, saw a 13.29% surge in value, reflecting positive market reception.

Read more: What Is Ethena Protocol and its USDe Synthetic Dollar?

Ethena Labs, the driving force behind UStb, secured $14 million in a strategic funding round earlier this year. It achieved a valuation of $300 million in a round led by Dragonfly and Maelstrom.