Ethena has opened a new route into institutional credit through a $1 billion secured facility with FalconX. The agreement lets FalconX finance borrowers with assets supporting USDe. Ethena seeks returns beyond traditional crypto strategies. The structure could broaden USDe’s income sources, but it increases exposure to collateral performance.
Credit Channel
FalconX will originate and manage loans through a special purpose vehicle for institutional clients. Loans can support trading, treasury, and payment activities.
Qualified custodians will hold pledged assets, limiting borrowers’ control over collateral. Borrowers are expected to give security greater than their loan amount, thus providing security against decreases.
Ethena will retain first-priority security rights over assets inside the facility. However, both companies withheld loan rates, maturities, collateral types, and minimum collateral ratios.
Diversifying USDe Returns
The facility expands a credit strategy Ethena had already begun building. Its July report showed about $310 million in institutional loans, representing 6.9% of USDe backing. That exposure carried estimated yields between 4% and 7%.
In addition, the size of the DeFi lending allocation remained the same at about $2 billion. As a result, FalconX can serve as an institutional credit exposure alternative to improve the demand for Ethena.
Significantly, basis trades had fallen near $39 million. However, credit introduces borrower, custody, legal, and liquidation risks.
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