Ethena Diversifies USDe Yield: $1 Billion Credit Facility with FalconX

Ethena has established a $1 billion secured credit facility with FalconX to move the yield model for the assets backing USDe beyond funding rates.

According to the announcement made by the companies on Wednesday, the arrangement will provide funding for loans originated by FalconX, an institutional digital asset prime broker. These loans can be utilized for trading strategies, corporate treasury management, and payments. Consequently, the assets backing USDe will be deployed in institutional credit mechanisms in addition to crypto market transactions.

Funding rates, which play a significant role in USDe’s yield structure, can compress or turn negative if demand for leveraged crypto positions declines. In perpetual futures, funding rates represent the periodic payment flow between position holders. Therefore, the $1 billion facility holds the potential to create an alternative to funding rates and a relatively more stable source of yield for Ethena.

Ethena moves USDe yield beyond funding rates

The loans facilitated by FalconX will be over-collateralized; in other words, there will be collateral valued higher than the amount lent. Collateral will be held with qualified third-party custodians, and Ethena will have a first-priority security interest in the facility’s assets. This structure will position the priority of claims on the relevant assets in Ethena’s favor regarding loan repayments.

According to the announcement, FalconX will act as the party originating the loans, managing them throughout the process, and monitoring collateral. The companies described the arrangement as one of the largest applications of on-chain capital directed toward secured institutional credit. Ethena Labs founder Guy Young stated that secured institutional credit is one of the largest and most enduring sources of yield in the financial world.