Ethena Labs Recommends SOL for USDe Collateral

Ethena Labs, the organization responsible for developing and maintaining USDe, has proposed adding SOL as part of the collateral that forms the treasury of the synthetic stablecoin.

USDe differs from stablecoins like Tether’s USDT or Circle’s USDC because it is synthetic and not backed 1:1 by fiat assets. The USDe maintains its $1 peg by collateralizing stablecoins and utilizing hedged cash and carry trading, which involves taking futures positions with large open positions to stabilize the value, backed by a reserve fund to manage risk in volatile market conditions.

If the proposal is approved by Ethena’s Risk Committee, which is independent of Ethena Labs, SOL will be gradually integrated as a collateral asset for USDe with an initial allocation target of $100-200 million. This initial allocation will represent roughly 5-10% of SOL’s open interest, similar to its 3% stake in global open interest for BTC and 9% for ETH.

Additionally, the proposal also considers using liquid staking tokens (LSTs) such as BNSOL and bbSOL, similar to Ethena’s use of ETH LST, which currently represents one-third of its ETH allocation.

Recently, Ethena announced its tokenization for USDe, in line with DeFi’s trend to generate returns from asset-backed tokens, BlackRock’s BUIDL, Mountain’s USDM, Superstate’s USTB, and Sky’s USDS. announced that it allocated $46 million to real-world asset investments.