Last week, Ethena Labs saw its stablecoins (USDe and USDtb) experience significant volatility. The vector for the event appears to be a combination of President Trump’s declaration of additional tariffs on China and the liquidation of crypto on Binance.
On October 12, Binance confirmed a review of impacted accounts and pledged full compensation for unfair liquidations, estimated to be a total of $283 million.
Today, Ethena’s founder Guy Young thanked Binance for their rapid response shared via X:
“Want to commend the speed with which Binance has addressed the losses on their platform. The size of user compensation is unprecedented. This is the first step to regain user trust which will be rebuilt through time. Now is not the right time to be blaming each other. Binance has not shied away from the incident but has instead addressed them head on and offered immediate solutions, which should be commended. To address any concerns on the relationship between Ethena and Binance, our partnership remains strong and is not impacted by the events over the weekend. We will continue supporting each others products. We are also supporting where we can to update their oracle approach and risk parameters to better manage extreme tail end scenarios going forward, and will both be providing updates on this solution later this week.”
Binance CEO Richard Teng apologized for the event, stating:
“We will not make excuses — instead, we will listen carefully, learn from the events, and strive to do better. If you are still facing any unresolved issues, please contact the Binance customer service team. Each case will receive the attention it deserves and will be properly handled, and compensation will be provided where applicable.”
Reports indicate that USDe fell to as low as $0.65 – a significant haircut that can cascade into margin calls for traders.
In a blog post yesterday, Binance stated that it continues to review and process impacted users.
“We will continue to maintain full transparency and continuously update the community on the compensation progress via official channels to ensure that every affected user’s case is properly addressed.”
Ethena Labs noted that its mint and redeem function had zero downtime, processing more than $1 billion in a few hours and $2 billion in 24 hours with no issues.
Ethena Labs has also stated that it is over-collateralized.
As the stablecoin marketplace is booming, any hiccup can cause concern for an issuer. An established stablecoin issuer can generate significant revenue under the regulatory parameters established in the US.
Last July, Ethena Labs established a partnership with Anchorage Digital, a federally chartered digital asset bank. Under the agreement, Ethena will issue a compliant stablecoin in accordance with the GENIUS Act.
Ethena Labs is revisiting this arrangement today, noting that the USDtb smart contract has been transitioned to Anchorage Digital, making it compliant with US regulations.
Ethena Labs also shared that Anchorage Digital will assume control over minting and redemption, and the administrator keys were transferred to Anchorage Digital. A smart contract upgrade is said to be underway.
