Ethena Secures US $100M Funding From Institutional Players Franklin Templeton, Dragonfly Capital

According to a report from Bloomberg yesterday the decentralised stablecoin project, Ethena, has raised US$100 million (AU$157m) to develop a new version of its USDe stablecoin targeting large institutional use cases. The new stablecoin will be known as iUSDe and will form the centrepiece of Ethena’s attempt to bridge the crypto and TradFi worlds.

A source close to the project claims that the fundraising involved sales of Ethena’s ENA governance token at a price of US$0.40 to several large institutional investors, including Franklin Templeton, Pantera Capital and F-Prime Capital. The funding was completed in December of last year but was only made public yesterday. 

Sources close to the project told Bloomberg that Ethena will also be using some of the US$100 million raised to develop its own purpose built layer-1 blockchain.

Related: Arthur Hayes Bullish on Ether’s Future, Reveals ETH, Ethena and Pendle Holdings at Token2049

New Token ‘Identical To’ Staked Version Of USDe

The new institutional version of USDe was teased in a January blog post by Ethena Labs founder, Guy Young — Ethena Labs is the startup behind Ethena. In that post Young explained that iUSDe would be “identical to” sUSDe (the staked version of USDe) with a few minor additions to ease regulatory compliance for institutional users:

iUSDe is identical to sUSDe with the addition of a simple wrapper contract that adds a handful of transfer restrictions at the token level so that it can be held and used by traditional financial entities.

Guy Young, Founder of Ethena Labs

Young added that deepening ties with TradFi through iUSDe will be Ethena’s main goal for Q1 of 2025:

The singular focus for Q1 2025 will be working with traditional finance distribution partners to enable their clients to access iUSDe.

Guy Young, Founder of Ethena Labs

Ethena Strengthens Its Ties To Powerful Players

In addition to now having large institutional backers, Ethena has also cultivated ties with powerful political figures, including the Trump family. 

Ethena Labs announced in December that it had entered into a strategic partnership with the Trump family’s DeFi project, World Liberty Financial (WLFI), adding that “a governance proposal has been submitted to add sUSDe to WLFI’s upcoming Aave instance as a core collateral asset.”

These ties to powerful figures in TradFi and politics build on what was a breakout year for Ethena in 2024 — with USDe having grown to become the third largest “USD asset in the space at $6 billion supply in 10 months”, according to Young. 

Related: Trump-Backed DeFi to Boost His Personal Wealth, Not Crypto, Says Digital Asset CEO

Young also claims Ethena was the second fastest crypto startup in history to reach US$100 million in revenue, second only to the Solana memecoin launchpad, pump.fun.

This growth has been largely driven by USDe’s incredibly high yields, which have at times hit as high as 60% per year. Ethena can offer these high yields because USDe differs from the leading stablecoins, USDC and Tether, in a number of important ways: 

• Firstly, it isn’t backed by US dollars or Treasury bills like those other stablecoins, but is instead backed by digital assets — largely other stablecoins. 
• Ethena also uses basis trades — taking advantage of price differences between spot and futures markets — to boost USDe’s yields. This strategy works great during boom times, but can be risky during bear markets as futures prices fall, putting pressure of reserve funds and potentially leading to a depegging from the dollar. 

Those of us who remember what happened in 2022 when the Terra stablecoin catastrophically depegged will be acutely aware of the potential risks of these high-yielding stablecoins should things go awry.