Ethena ENA 12.14% is set to launch a new stablecoin, UStb, in collaboration with the real-world asset tokenization platform Securitize.

UStb is designed to function in the same way as traditional stablecoins and is expected to invest its reserves in BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which is tokenized on Ethereum, according to a statement shared with The Block.

BlackRock’s BUIDL fund invests in U.S. dollars, short-term U.S. Treasury bills and repurchase agreements. Since launching in March this year, BUIDL has swiftly grown to become the largest tokenized U.S. Treasuries fund, with over $522 million in assets under management.

The tokenized government securities market now totals more than $2 billion, according to data compiled by asset management firm 21.co, the parent company of bitcoin exchange-traded fund provider 21Shares. 

Tokenized government securities. Image: Dune.

Securitize facilitates more than $950 million in tokenized investments, including tokenizing funds for BlackRock, Hamilton Lane and KKR across asset classes.

Independent of USDe

UStb would exist as a “wholly independent product,” offering an alternative and completely different risk profile compared to Ethena’s existing USDe stablecoin, the team said.

USDe, also described as a synthetic dollar, launched in February, subsequently rising to become the fifth-largest stablecoin by market cap, according to The Block’s USDe Price Page, with a current circulating supply of $2.6 billion.

USDe differs from traditional stablecoins by using derivative hedging strategies instead of direct fiat or asset backing. It relies on ether, bitcoin, solana and other crypto assets as collateral, with an arbitrage-based minting and redeeming system to maintain its U.S. dollar peg. It also generates yields via a cash-and-carry strategy.

However, USDe introduces risks, including exposure to derivatives markets, exchange counterparty risk, and collateral volatility, which could affect its peg stability during adverse market conditions.

The stablecoin saw nearly $100 million in redemptions amid a crypto market selloff stress test in August, briefly dipping marginally to $0.997 before returning to its $1 target. Ethena Labs also temporarily deactivated its frontend after its domain registrar account was compromised last week.

UStb can help USDe weather difficult market conditions, according to the statement. “If deemed necessary and appropriate by Ethena’s governance, during periods of negative funding rates Ethena will be able to close the hedging positions underlying USDe and re-allocate its backing assets to UStb to further ameliorate related risks,” the team explained.

Ethena also intends for UStb to be used as an alternative to USDe as margin collateral on centralized exchanges it has partnered with, including Bybit and Bitget.

In February, Ethena Labs announced it had raised $14 million in a strategic funding round at a $300 million valuation, co-led by Dragonfly and BitMEX founder Arthur Hayes' family office, Maelstrom.