Ethena, the protocol behind the $3.4 billion yield-generating “synthetic dollar” token USDe, is planning to invest a part of its reserves in tokenized real-world assets (RWA), and BlackRock’s BUIDL fund is among the first applicants to throw its hat in the ring.
The protocol laid out plans in a July 16 governance post to allocate a part of its $235 million USDT holdings, roughly 7% of collateral assets, and its $45 million surplus buffer called the Reserve Fund to RWA products to earn a yield. Ethena’s token provides yield to investors by buying spot bitcoin (BTC) and ether (ETH) and parallelly selling, or shorting, perpetual swaps of the assets on crypto exchanges, harvesting the funding rate.
BlackRock’s BUIDL, a money market fund represented by an Ethereum-based token, seeks a $34 million allocation from Ethena’s $45 million Reserve Fund, according to a Monday post by Jonathan Espinosa from tokenization platform Securitize, BUIDL’s distribution partner.
Steakhouse Financial also applied for a Reserve Fund allocation on Monday with a USDC lending vault on DeFi platform Morpho Blue, which is overcollateralized by wrapped bitcoin (wBTC), wrapped staked ether (wstETH) and Backed’s tokenized Treasury Bills product (bIB01).
Mountain Protocol, issuer of the USDM yield-bearing stablecoin, also signaled interest in applying, with founder Michael Carrica replying last week to the governance post that the protocol “will be presenting a proposal in the coming days.”
All prospective applicants will need to post their proposal publicly on the governance forum, Guy Young, founder of Ethena Labs, the developer company behind the protocol, said in an email.
Ethena’s open competition is the latest example of tokenized RWAs getting increasingly used in the crypto-native, decentralized finance (DeFi) world. Most recently, DeFi lender MakerDAO announced plans to invest $1 billion of backing assets of the DAI stablecoin in tokenized Treasury products, while ArbitrumDAO, an ecosystem development organization of Ethereum layer-2 Arbitrum, finalized a similar contest to allocate the equivalent of 35 million of ARB tokens in tokenized offerings.
UPDATE (July 23, 21:35 UTC): Clarifies that the BlackRock, Steakhouse proposals are for Ethena’s Reserve Fund allocation.
In conclusion, this move by Ethena to invest in tokenized real-world assets through its Reserve Fund is indicative of the increasing adoption of decentralized finance (DeFi) practices in the crypto industry. With big players like BlackRock’s BUIDL fund and other financial institutions showing interest in these opportunities, it highlights the potential for growth and innovation in the space. Keep an eye on how these developments unfold and the impact they may have on the broader financial landscape.