Portuguese Startup Ethena Garners $6 Million in Funding from DragonFly, Huobi for Stablecoin Development

Several venture capital firms have collectively poured in millions into Ethena, a Portugal-based startup. A total of $6 million (roughly Rs. 55 crore) has been poured by multiple investment firms into Ethena, that is gearing to launch a stablecoin backed on the Ethereum blockchain in the coming months. Dragonfly led this seed funding round, along with the participation of other firms like BitMEX founder Arthur Hayes, Maelstrom, Gemini, and Huobi among others.

Stablecoins are cryptocurrencies, values of which are pegged against reserved assets like gold or fiat currencies. Unlike regular cryptocurrencies, stablecoins are less affected by market volatility.

Ethena is planning to launch a fully collateralised stablecoin called the USDe that will have the ability to facilitate settlements and on-chain custody.

This upcoming stablecoin will be pegged against the US dollar and will utilise user-provided collateral to hedge the price exposure and bet against Ethereum using perpetual swaps, a report by CoinDesk said on Tuesday, July 18.

“USDe is the first decentralised, scalable, and stable asset with returns derived from the economic activity of Ethereum and futures markets. Ethena distributes collateral to a diverse set of secure, programmable, and transparent on-chain MPC custodial contracts. The Ethena native money markets will further enable minting of USDe against liquid staking tokens to allow users to maintain long exposure to Ethereum whilst generating USD liquidity,” information available on Ethena’s official website has said.

The hefty investment in Ethena from multiple investment capitalists including Deribit, Bybit, and OKX among others, seemingly testifies to the buzz around stablecoins that has gathered heat in recent days.

In April this year, the UK recognised stablecoins as an official mode of payment. Stablecoins, like Tether and Binance USD, are crypto assets pegged to reserve assets like gold or fiat currencies.

Earlier this week, DeFi protocol Aave launched its US dollar-backed stablecoin called the GHO on the Ethereum blockchain. The stablecoin is backed by a ‘multitude’ of digital assets including ETH and Aave’s native cryptocurrency, Aave.

To oversee the growth and safe approach towards stablecoins, the Financial Stability Board (FSB) has said that it was finalising its own version of the global regulatory framework for the digital assets sector, that will focus on stablecoins.

The body that oversees recommendations about the global financial systems has decided to supervise and oversee global stablecoin arrangements (GSCs), aiming to promote responsible innovation.