Ethena Labs Proposes Adding SOL as a Backing Asset for Its USDe Stablecoin

Decentralized finance protocol Ethena, known for its synthetic dollar USDe, could onboard Solana's native token SOL as a backing asset for the stablecoin.

Decentralized finance protocol Ethena, known for its synthetic dollar stablecoin USDe, could onboard Solana’s native token SOL as a backing asset for the stablecoin.

The community is now considering an Oct. 10 proposal from Ethena Labs that suggests an allocation of USDe’s backing to SOL. The setup would utilize the same mechanics as the hedging mechanism in place with BTC and ETH perpetual futures.

According to the proposal, the allocation would be scaled in slowly given that SOL perpetual futures have a shorter history of trading, less liquidity, and relatively lower funding rate data.

Ethena first hinted at the potential inclusion of SOL as a backing asset for USDe in August, when the protocol rolled out USDe on the Solana network. Now that the proposal has officially been put forth to the governance forum, members of the Risk Committee — excluding Ethena Labs Research — must vote unanimously in favor of it to be approved.

The Risk Committee will have seven days after this proposal’s publish date to deliberate and arrive at a decision, meaning a verdict on its approval is likely before the end of the week.

The proposal also suggests considering Binance Liquid Staked SOL (BNSOL) and Bybit Liquid Staked SOL (bbSOL) to be added as a USDe backing asset. The tokens would be added in the same proportion as the overall SOL allocation as ETH Liquid Staking Tokens (LSTs) to the total ETH allocation within USDe’s overall backing.

“This has the potential to make Ethena one of the largest perp traders of SOL on the market and drive higher sUSDe APY,” said Seraphim Czecker, head of growth at Ethena Labs.

According to Yash Agarwal, core contributor to the Superteam collective of Solana developers and creators, adding SOL as a backing asset to USDe could “be huge for the moneyness of SOL.”

Agarwal highlighted SOL’s $2 billion in open interest, which would make $200 million as collateral easy to scale into. The proposal’s authors estimate that this will be the initial target, with positions of between $100 million and $200 million representing 5-10% of SOL’s open interest.

Ethena currently represents 3% of BTC open interest and 9% of ETH open interest.