Ethena Picks BlackRock's BUIDL, Mountain, Superstate and Sky's USDS for $46M Tokenized RWA Investment

As a seasoned analyst with over two decades of experience in the financial industry, I find Ethena’s decision to diversify its Reserve Fund into various stablecoins and tokenized funds intriguing. With my background in traditional finance and emerging tech, I can see how this move aligns with the broader trend of DeFi platforms seeking yield-generating opportunities that are independent from crypto market volatility.

Ethena, a decentralized finance (DeFi) protocol that produces the $2.5 billion yield-earning “synthetic dollar” token USDe, declared on Thursday its intention to allocate its $46 million reserve fund into various assets such as BlackRock’s and Securitize’s tokenized fund BUIDL, Mountain’s USDM token, Superstate’s USTB, and the newly-renamed USDS stablecoin of Sky (formerly Maker) for investment.

According to a recent post on the governance forum, approximately $18 million worth of BUIDL, $13 million in USD, $8 million in USDM, and $7 million in USTB will be distributed from the Reserve Fund under the protocol’s designation.

USDe operates by keeping actual Bitcoin (BTC) and Ether (ETH) while selling equivalent derivative contracts of these cryptocurrencies. This allows USDe to gain from differences in funding rates, a common term used in the derivatives market. The strategy enables Ethena to yield returns on extra funds amassed from protocol income, which can act as insurance during periods when funding rates become unfavorable.

Ethena is following an emerging pattern among DeFi platforms and protocol foundations, by transferring a portion of their reserves into tokens tied to real-world assets like U.S. short-term government bonds. This strategy allows them to generate returns that are unrelated to the crypto market, while still operating within the confines of blockchain technology. The data from rwa.xyz indicates that this trend has led to a tripling in size of the tokenized Treasury market over the past year, reaching $2.2 billion.

The decision was made following Ethena’s announcement in July to use its Reserve Fund to invest in financial products supported by RWA. A total of 25 applicants sought allocation, and the final choices were made by the Ethena Risk Committee, a group of five voting members from DeFi risk and consultancy firms: Gauntlet, Block Analitica, Steakhouse, Llama Risk, and Blockworks Advisory. The Ethena Foundation served as a non-voting member in this process.

In the future, earnings from the Reserve Fund won’t be automatically invested into specific products. Instead, such decisions will be made separately, as confirmed by a representative from Ethena via email to CoinDesk.

2024-10-10 18:18

Ethena Picks BlackRock’s BUIDL, Mountain, Superstate and Sky’s USDS for $46M Tokenized RWA Investment

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