What Is USDtb, and Why Did Ethena Build a Second Stablecoin?
Ethena Labs found itself facing a problem it couldn't code around. Created by algorithmic stablecoin platform Ethena, USDe was designed around a delta-neutral strategy that captured significant value in up markets and exposed it to meaningful risk during down markets. Negative funding rates flipped USDe's arbitrage mechanism, threatening the stablecoin's dollar peg. So late last year, Ethena did the opposite of what you might expect: it minted a whole new stablecoin to seize on what USDe gave up. USDtb's story starts there. Conceived out of necessity rather than desire. Backed nearly entirely by BlackRock's BUIDL tokenized U.S. Treasury ETF, the stablecoin had grown to be more than just an insurance policy by the time its total supply hit $1 billion in 2025. It was Ethena Labs' solution to a structural weakness that its own critics had warned of since the launch of USDe. The road to get there is a bet on dual-stablecoin architecture few, if any, other major protocols were willing to stake.
USDe versus USDtb risk profiles. Source: Ethena Labs disclosures and stablecoin documentation.
The Flaw Ethena's Team Couldn't Patch with Code
USDe worked really well during upward trending markets. Ethena would go long crypto collateral, and short the perpetual futures contracts referencing that collateral. It would earn the funding rate paid by longs to shorts. This yielded a real yield. Kept the peg. DeFi balances soared to $6 billion. The issue was circular. Crypto futures funding rates can become negative (shorts pay longs) in a sustained downtrend. During these periods Ethena's income stream flips and the protocol burns money just to maintain its positions. This isn't theoretical. If you've paid attention to crypto markets in 2022-2023 you've seen prolonged periods of negative funding. Ethena's team realized a prolonged bear market could drain away USDe's reserve fund and no amount of smart contract audits can fix a fundamental economic risk. Delta-neutral needed an off-ramp. It couldn't be another leveraged position. Some other kind of hedge either. It had to be a brand new, orthogonal vector: A stablecoin with zero exposure to crypto market direction. USDtb was built to fill that role. Fully backed by tokenized U.S. Treasuries, it has no directional exposure like USDe does. When markets get wild, USDtb doesn't just hold. It's designed to soak it up.
How the USDtb Token Runs on Treasuries, Not Trades
USDtb's tokenomics are fairly simple next to its brother. 90% of USDtb's reserves are invested in BUIDL, BlackRock's USD Institutional Digital Liquidity Fund consisting of short-term U.S. Treasury bills and the rest is invested in other tokenized treasury products. There are no hedges, perpetual futures or reliance on a funding rate. USDtb will always trade near $1.00 due to it being backed by the safest dollar-denominated asset possible. The issuer of the token is called Pallas (BVI) Ltd, which is incorporated in the British Virgin Islands while the operating entity Pallas Foundation is incorporated in the Cayman Islands. Services are provided by Ethena Labs with affiliate Athene Management Ltd. (AMG) serving as the investment manager. This is important to note from a strictly legal standpoint as it ensures USDtb reserves will not be legally commingled with USDe's hedge trades. There is now legal/governance separation to operationally insulate the two stablecoins from each other. The mint/burn occurs through smart contracts which interact using EIP-712 & EIP-1271 signatures. Last-look filtering is done on an RFQ server to screen out bad actors/orders. Settlement is done on-chain. Quantstamp, Cyfrin, Pashov Audit Group, and Code4rena have audited the Protocol Contracts. USDtb will use LayerZero to power the token network across blockchains and Stargate Finance to power cross-chain liquidity. With a market cap of just under $627 million and a circulating supply of just over 627 million USDTB tokens as of 5/1/2026, the stablecoin finds itself in a stagnant state after its rapid growth in 2025. USDtb token is trading for $0.99.
Reallocation Switch That Changed the Architecture
This incentive alignment is why Ethena was built as a system rather than two separate products. With how Ethena was built, the protocol has in essence built a reallocation mechanism. Should downward pressure on USDe's peg occur due to negative funding rates, the protocol can shift collateral backing away from USDe's delta-neutral reserves into USDtb's treasury backed reserves. This means that during times of market stress the protocol can automatically self-stabilize into a safer state by decentralizing exposure to the factors that would otherwise hurt USDe. This isn't a panic button. This is a feature. Yield earning (USDe) and financial stability (USDtb). Previously, projects had to choose. Ethena doesn't. With Ethena, it can do both based on current market conditions. When the markets are calm, USDe can earn money from positive funding rates. When markets get rougher, USDtb can serve as a yield-bearing safe haven backed by U.S. Government debt. Listing on Aave as part of its Core Instance in May 2025 made all of this possible. Borrowing USDtb on Aave reached a new all time high of $25.8 million according to data from Sentora. Users can earn additional promotional rewards from Merkl for supplying USDtb on Aave, Morpho, Euler and Fluid on top of normal supply APR. Bybit would go on to list USDtb as a margin collateral with up to 5.00% APR for holders. The DeFi integrations allowed the token enough liquidity and utility away from its use as a backstop, that people actually wanted to hold it even when the market wasn't crashing. Speaking of crashing, on October 14, 2025, another press release was announced by Anchorage Digital Bank. Starting October 27, Anchorage would begin onshoring USDtb making it the first federally regulated stablecoin in the United States by partnering with the OCC. With this announcement, the use case of the token changed yet again. Instead of being a primarily de-risking tool, USDtb was now a compliance first product with an institutional wrapper. Anchorage became the exclusive issuer of USDtb, while customers could mint, redeem and earn incentives by simply using Anchorage's platform itself. The transition marked the first time we saw users switch between issuers for a major stablecoin (circa $2 billion market cap).
Why Dual-Stablecoin Design Pressures Competitors
A note on market share briefly, because two entities own and will continue to own the stablecoin space. Tether (USDT) and Circle (USDC) combined own around 85% of all stablecoin total supply. USDT grew by 34% in 2025 alone. USDC grew by upwards of 75%. Throw USDtb into a pond with those two whales and what is its relative size? From a pure market share standpoint it's rounding error. From a design philosophy stance it's something completely different. USDT and USDC do not maintain a pair. They are their own standalone product. By having two stablecoins with different risk profiles baked into their DNA Ethena has opened up a structural flexibility that a single token stablecoin will struggle to match without that extra legwork of maintaining a second product. PYUSD, RLUSD, USD1, USDf, etc. the other stablecoin projects that launched in 2025 all have single coins, single products. They do not have a dual-token structure. Their coins will not automatically gain market share. USDtb's share of liquidity is small compared to the market's majors. But USDtb's 24hr volume, after climbing 887% in a single day, sits at around $5 million. Institutional allocators who need to consider stablecoin risk as a factor in their decision making. Having Ethena be able to say "we have a plan B" is something. Two institutional players Zodia Custody (partnered with Standard Chartered & Northern Trust) partnered with Ethena to allow institutional USDtb holders to earn rewards on their safe custodied coins. Retail facing partnerships are nice, institutional integrations change the game. Bonus? There's another regulatory element here with the GENIUS Act. USDtb's partnership with Anchorage Digital allowed USDtb a compliance first path that many other stablecoins launched in 2025 do not have. But for projects who care about where their reserves are sitting based on following ZRX price or just plain ol' collateral concerns, or for traders looking to arbitrage around opportunities like bonk airdrop, where these new stablecoins fall in regulated or non-regulated will become a risk management factor.
Where Ethena's Two-Token Experiment Goes from Here
Ethena created USDtb for one reason: when market conditions attack its funding model, what does a delta-neutral stablecoin do? They created a second stablecoin backed by Treasuries, legally separated, and able to absorb the stress. This safety mechanism has evolved into a whole ecosystem: a regulated product, complete with DeFi integrations, institutional custody partnerships, and a market capitalization of nearly $627 million. USDtb has never had its core thesis stress-tested during a prolonged bear market since launching in December of 2024. We don't know if reallocation can function properly during a drawn-out period of negative funding. USDtb's value is at reallocation risk if BlackRock's BUIDL becomes too concentrated as a reserve asset, despite BUIDL's reserves being comprised of the safest assets in existence. But the infrastructure being developed atop USDtb is a genuine structural innovation in stablecoin architecture. Issuers who utilize a single token represent a single risk profile. Ethena represents two. When market conditions are right, capital will flow between the two. For an industry that's still figuring out USDtb's long-term viability, its lasting role may depend less on the token itself and more on how it performs during the next down market.
