Ethena Labs Raises $100M For TradFi Expansion With New Token

Tags: ethena

Key Takeaways:

• Ethena raised $100 million in a private token sale led by Franklin Templeton and F-Prime Capital.
• The proceeds from this will help create a new token for TradFi and Ethena’s own blockchain.
• USDe, the stablecoin of Ethena, remains over 100% collateralized, signs of which can also be seen in the risk management approach taken towards trending hacks on exchanges.

To recap, the innovative USDe “synthetic dollar” stablecoin developed by Ethena Labs is making waves once again. Hot on the heels of establishing an impressive presence in the DeFi space, the firm has quietly raised a sizable funding round to unveil a new token that targets traditional finance (TradFi) players directly.

Funding Drives TradFi Push

On February 24th, Bloomberg reported that Ethena’s private token sale, conducted in December 2024, raised a whopping $100 million. Investors purchased Ethena’s governance token, ENA, for an average of $0.4 in the sale. This sale was originally news that boosted the price of ENA to a multi-month high of $1.30 before a downtrend correction. Although the crypto space is no stranger to price changes, the initial jump illustrates the market’s bullish sentiment on Ethena’s vision.

This was more than just a funding round; it also established key strategic alliances. The investors list looks like a who’s who in the financial world, including:

• Franklin Templeton
• F-Prime Capital (Fidelity Investments)
• Dragonfly Capital Partners
• Polychain Capital
• Pantera Capital Management

With such heavyweights involved, it indicates the increasing legitimacy of decentralized finance among mainstream institutions and Ethena’s prospects of melding both realms. Franklin Templeton’s participation, as a firm managing over $1.5 trillion in assets, was a strong endorsement of Ethena’s credibility, and its long-term prospects. This underscores that TradFi is increasingly embracing DeFi, with Ethena positioned at the forefront of this convergence.

sUSDe to iUSDe: A Token Built for TradFi

What does Ethena intend to do with this new infusion of capital? The bottom line: expand into the traditional financial system. Ethena plans to allocate the funds toward the creation of an independent blockchain and the issuance of a new token catering to TradFi institutions. The announcement follows recent plans made by the Ethena Labs founder, Guy Young, regarding a financial institution-friendly compliant offshoot of their stablecoin, iUSDe.

iUSDe is designed to work like sUSDe (Staked USDe) — but with one key distinction: it will use “simple wrapper contracts” to enforce transfer restrictions on-chain. This feature could be crucial in attracting TradFi players, enabling them to meet regulatory requirements and risk management policies. Now, consider a scenario where an asset manager allocates a small portion of its fixed-income portfolio to a crypto-based stablecoin. With the transfer restrictions in the iUSDe, an asset manager can control where these tokens can be sent, limiting the risk of the asset manager or issuer running afoul of regulatory requirements.

Young’s main priority for Ethena will be the onboarding of TradFi distribution partners to make iUSDe accessible during the first quarter of 2025. This highlights the company’s strategy of bridging the gap between DeFi and traditional financial markets while taking advantage of the increasing institutional interest in stablecoins. If successful, this strategy could mobilize a tidal wave of new capital to the crypto ecosystem.

USDe: A Stablecoin Raised on Stronger Foundations

Ethena’s flagship product is a synthetic dollar or “USDe” stablecoin that is designed to remain pegged to the USD using an innovative mechanism. Rather than the traditional stablecoin model where dollar equivalents are maintained in the form of reserves and regulated by fiat currency, USDe employs both a combination of:

• The delta-neutral hedge: This strategy involves taking both long and short positions in cryptocurrency derivatives.
• Off-exchange collateral: Ethena’s collateral is kept in safe custody off-exchange, reducing exposure to exchange-related attack vectors.

This method has been fairly robust, even when faced with volatility in the market environment and security holes. The $1.4 billion hack on the Bybit exchange hasn’t helped projects that have been plagued by hacks or exploits and created skepticism over the sustainability of projects. Following the incident, however, Ethena Labs was quick to assure the community that USDe was still over collateralized, with Bybit exposure accounting for less than $30 million of the network’s total value. This is a testament to Ethena’s excellent risk management practices, as well as its commitment to ensuring that users’ assets are protected. Ethena’s swift action in the wake of the Bybit attack highlights their commitment to transparency and investor confidence, a key ingredient to help drive long-term sustainability across the volatile crypto market.

More News: Bybit Suffers Massive $1.4 Billion Hack: What You Need to Know

Additionally, Ethena also released USDtb, a new stablecoin that is backed by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL). BUIDL, which holds 90% of its reserves, USDtb is available in different networks like Ethereum, Base, Solana, Arbitrum. It is also designed to reinforce USDe stability in times of market shocks.

Allies with TradFi and scandalous news

Ethena’s drive to bridge between TradFi and DeFi goes beyond just iUSDe. Later in 2024, the firm formed an alliance with a DeFi initiative supported by ex-U.S. President Donald Trump known as World Liberty Financial (WFLI). Integrating sUSDe with the WFLI Aave instance to allow users to deposit USDe and earn up to 2x rewards in sUSDe and WLF tokens.

The partnership raises some eyebrows as one of the partners is none other than the DeFi project of the ex-president Donald Trump. This indicates that Ethena is willing to work with controversial figures in the traditional finance and political world. Ethena’s collaboration with WFLI highlights its willingness to think outside the box when trying to grow its reach and acquire new users, even if it involves associating with projects deemed controversial by some (image shows WFLI white paper references).

There are Challenges and Opportunities Ahead

While Ethena’s ambitions and novel methodology are impossible to overlook, the company does face significant challenges. Ethena operates within a constantly changing regulatory landscape around stablecoins, which presents both challenges and opportunities. USDe and iUSDe’s success depends on Ethena’s navigating complex international finance laws to establish partnerships with regulated institutions.

Secondly, the crypto market is highly volatile, and will require constant vigilance and sophisticated risk management strategies to keep USDe stable amidst huge price fluctuations. In that regard, the launch of USDtb earlier this month is a good first step.

Despite this, Ethena has leveraged a gap in the emerging world of decentralized finance. Ethena has the potential to open up a new world of financial innovation and democratize access to high-yield investment opportunities by bridging the gap between DeFi and TradFi.