Ethena’s USDe has quickly climbed to be the third-largest stablecoin in the world, behind only USDT and USDC. Its market cap would be quite large, between $5.46B and $5.88B as of early June 2025. Despite the regulatory storm clouds forming, the stablecoin’s novel method of entering the yield generating and collateralization space has been met with substantial hype.
Ethena was officially launched in July 2023, and co-founder Guy Young. The protocol's design is notably inspired by BitMEX founder Arthur Hayes's "Luna Brothers, Inc." blog post, which explored novel stablecoin mechanisms. The protocol’s ecosystem has been gained by more than 682,000 users in 24 chains.
The Rise of USDe
USDe operates with a 1:1 collateral ratio for minting, making it more capital-efficient compared to over-collateralized stablecoins. Currently, part of USDe’s collateral consists of staked Ethereum (stETH) and other liquid staking tokens. These assets increase its capacity to yield. This mechanism is what allows USDe to provide dynamic, competitive, and attractive returns while still keeping USDe pegged 1:1 to the U.S. dollar.
The stablecoin experienced explosive growth in market capitalization, briefly surpassing DAI between December 2024 and March 2025, underscoring its increasing adoption and market confidence. This quick rise indicates a massive market appetite for yield-generating stablecoins. Beyond that, it creates an imperative for novel, more effective strategies to win in the competitive stablecoin space.
USDe's attractive yields are derived from two primary sources: staking rewards from ETH and funding rates from derivatives markets. These multi-faceted revenue streams help the protocol provide its users with attractive APYs while still being competitive. Their capacity to generate yield from so many different sources makes USDe an attractive and stable alternative stablecoin, rather than unstable.
sUSDe and ENA Token
Users who stake USDe in exchange for sUSDe share in the distribution of revenue, with a 7-day unstaking period. sUSDe holders can receive competitive yields. Such as, between earning ~10% APY through ETH staking rewards and derivatives market funding rates. sUSDe provides competitive annual returns, ranging as high as 30% APY during instances of strong price demand and stabilizing closer to the 7%-10% APY range.
For more: A Comprehensive Analysis of Yield and Payment Stablecoins
The ENA token will serve as the Ethena protocol’s native governance token. Since it’s developed on the Ethereum blockchain, it provides a stable and secure platform for users. The maximum supply of ENA tokens is limited to 15 billion. Today, there are nearly 6 billion ENA tokens circulating. The ENA token is the lifeblood of Ethena governance and operation.
The ENA token gives its holders the ability to influence the governance of the ecosystem’s protocol. Token holders will have the power to vote on ecosystem proposals, to propose changes and improvements, and to directly influence the development of the Ethena ecosystem.
Regulatory Challenges
Amid its growth, Ethena faces regulatory hurdles. Ethena's German entity was ordered to cease operations under MiCAR by Germany's BaFin. This regulatory action is significant as it highlights the growing levels of scrutiny that stablecoin projects are coming under from regulatory authorities around the globe.
The difficulties raised in this order by BaFin go beyond Ethena and all other stablecoin issuers. They have to make their way through a new and emerging regulatory environment. Adherence to developing regulations like MiCAR will help create the long-term sustainability and legitimacy that stablecoin projects need to thrive.
Ethena takes these challenges by the horns and fearlessly tackles them. It’s still innovating, still navigating through the ever-changeable regulatory landscape, and still staying true to its mission of providing a stable, yield-generating digital asset. Along with charge and time constraints, the project will need to successfully avoid these hazards to prosper. Its success will lead growth in the blue-chip stablecoin market.
