Ethena Labs announced on Thursday that it has released a new stablecoin product, UStb. The new stablecoin will be fully collateralized by BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) and function similarly to a traditional stablecoin.
Ethena Labs, the issuer of USDe stablecoin, stated in an X post on Thursday that it has launched a new stablecoin product, UStb, backed by asset management firm BlackRock and Securitize's BUIDL tokenized fund.
We are excited to announce Ethena's newest product offering: UStb
— Ethena Labs (@ethena_labs) September 26, 2024
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
UStb will function similarly to traditional stablecoins and is fully separate from Ethena's USDe. The team also aims to expand UStb to other centralized exchanges in order to offer partners a distinct choice of collateral.
"This will exist as an isolated product separate from USDe offering users and exchange partners a new product with a differentiated risk profile to USDe," Ethena Labs wrote in the post.
The launch of UStb may have been prompted by Ethena community members' concerns about USDe's stability during negative funding rate environments.
USDe maintains its price peg to the US dollar via a delta-neutral strategy that involves Ethena Labs purchasing Bitcoin/Ethereum in the spot market while opening an equivalent short position on the derivatives market. The process allows Ethena to gain yields from positive funding rates and ETH staking returns.
Funding rates are periodic payments between perpetual traders to maintain a contract's price with its spot counterpart.
A negative funding rate occurs when a contract's price falls below the spot price, indicating that short position holders have to pay long position holders.
Ethena claims that USDe has not suffered a whole week of negative funding despite bearish market conditions in the last six months.
Additionally, Ethena Labs mentioned that, based on a community decision, it may be forced to close down its hedging positions for USDe.
In this case, it will convert all of USDe's reserve assets to UStb to curb potential risks that negative funding environments may attract.
Ethena's front end was recently compromised after a hacker broke the site's defenses. However, the protocol remained unaffected, and user funds remained intact.