Kairos_Res
Tue, 14 Apr 2026 13:44:20 +0000
General

Proposal: Holding Whitelabel Stablecoin Assets in USDe Backing

TL;DR

Holding whitelabel stables like jupUSD and USDm in USDe backing is economically equivalent to holding USDtb directly, and allows Ethena to optimize backing composition by rotating out underperforming positions (e.g. low-yielding USDT) in favor of USDtb-backed assets that generate BUIDL yield for sUSDe holders.

The primary risk is not credit quality but liquidity timing, specifically how quickly whitelabel assets can be unwound back to liquid stables if needed. We propose concentration guardrails that can be adjusted as the program matures and live redemption data accumulates.

Yield follows risk: if USDe holders carry the USDtb exposure from whitelabel stalecoins, the BUIDL yield should flow to sUSDe. Ethena has confirmed this.

Each whitelabel asset maintains its own independent liquidity buffer (10–20% of backing), absorbing routine redemptions without drawing on USDe’s liquid pool.

Kairos Research has engaged with the Ethena team to confirm key parameters: yield flows to sUSDe on redemption, concentration guardrails are agreed as a starting framework, and Ethena will take a discretionary approach to unwinding whitelabel positions based on the rate environment.

1. Executive Summary

This analysis presents Kairos Research’s proposal for holding USDtb-backed whitelabel stablecoin assets (jupUSD, USDm) within the USDe backing portfolio. The core thesis is that whitelabel stables offer an opportunity to optimize USDe’s backing composition: rather than holding underperforming stablecoin positions (such as USDC, which generates no yield for sUSDe holders), Ethena can hold USDtb-backed whitelabel assets that generate BUIDL yield while maintaining equivalent credit quality.

The underlying economic exposure of holding jupUSD or USDm within USDe backing is functionally equivalent to holding USDtb or USDC directly, and the inclusion of these assets does not introduce new credit risk to the backing portfolio. The risk that does arise is liquidity timing: whitelabel assets require multi-step unwinding to convert back to liquid stables, and this document addresses the operational and structural considerations that inform the proposed framework.

Central thesis: When whitelabel assets sit in USDe’s backing, USDe holders bear the associated BUIDL/Treasury exposure, and in return should receive the yield generated by that exposure. This yield-for-risk alignment is the foundational principle of the proposal. Ethena has confirmed that USDtb yield from whitelabel assets held within USDe backing will flow to sUSDe holders.

This proposal also covers the redemption mechanics (where whitelabel tokens are absorbed into USDe’s backing and the user receives liquid stablecoins), addresses transparency requirements for whitelabel asset inclusion, and outlines concentration guardrails that can evolve as the program matures.

2. USDtb Redemption Mechanics and Liquidity Infrastructure

A central dependency in this proposal is the redeemability of USDtb, which is backed predominantly (~99%) by BlackRock’s BUIDL fund with a ~1% fiat USD liquidity buffer. Understanding the current USDtb redemption infrastructure is essential, particularly given the significant structural changes introduced in October 2025 under GENIUS Act compliance.

2.1 GENIUS Act Compliance and Structural Changes

Since October 13, 2025, USDtb issuance has been managed by Anchorage Digital Bank in a GENIUS Act compliant manner. The GENIUS Act is prescriptive on backing assets for compliant stablecoins, meaning USDtb has transitioned to solely being backed by BUIDL and fiat USD, with USDC and USDT no longer serving as backing assets. All backing assets are solely custodied by Anchorage Digital Bank, and USDtb remains freely transferable.

2.2 Current USDtb Backing: The 1% Fiat Buffer

USDtb’s fiat liquidity buffer is approximately 1% of total backing, confirmed by Ethena documentation at ~$10M on ~$940M of supply. This fiat buffer is the only capital available for 24/7/365 instant redemptions via Anchorage, and can be replenished in unlimited size within US banking hours via BUIDL redemptions. Outside banking hours, the fiat buffer is the hard ceiling for instant fiat redemption capacity.

This reinforces the importance of the layered redemption structure: each whitelabel asset maintains its own independent liquidity buffer (10–20% of backing), which absorbs routine redemptions before they reach USDe’s liquid pool or the Anchorage facility. For larger redemptions that exceed these buffers, alternative pathways through USDe’s liquid stablecoin reserves absorb the demand.

2.3 USDtb Redemption Pathways (Post-October 2025)

Following the GENIUS Act transition, USDtb redemption operates through two distinct channels:

Redemption Method | Settlement Speed | Availability | Details
Fiat USD via Anchorage Digital Bank | 15 minutes | 24/7/365 | 1:1, no fees. Requires Anchorage onboarding. Instant fiat buffer (~1% of backing, ~$10M); replenishable via BUIDL redemption during US banking hours in unlimited size within hours.
Atomic Swap via USDe Facility | ~24 seconds (2 ETH blocks) | 24/7/365 | Swap USDtb for USDT/USDC by (1) minting USDe with USDtb, then (2) redeeming USDe for USDT/USDC. All-in cost: 4bps via whitelisted special-purpose addresses.

2.4 Pathways No Longer Available

The following previously available USDtb redemption methods are no longer operational since October 14, 2025:

Direct USDtb → USDC redemption

Direct USDtb → USDT redemption

Direct USDtb ↔ BUIDL atomic swap (at the USDtb level)

These changes mean that BUIDL-level redemption channels (Circle smart contract, Securitize atomic swap, UniswapX RFQ) remain relevant for unwinding BUIDL itself, but they are no longer directly accessible from USDtb. The path from USDtb to USDC now goes: USDtb → mint USDe → redeem USDe for USDC, or USDtb → deposit at Anchorage → fiat USD.

2.5 BUIDL-Level Liquidity Channels

While USDtb holders can no longer directly access BUIDL redemption, these channels remain relevant for how Anchorage replenishes the fiat buffer and for Ethena’s own BUIDL unwinding operations. Ethena has confirmed there is no limit to the amount of BUIDL that can be subscribed and redeemed, and has tested single-day transactions exceeding $300M without issue:

BUIDL Channel | Settlement | Availability | Notes
USDC via Circle Smart Contract | Near-instant (T+0) | 24/7/365 | Dependent on USDC reserves in contract
Securitize Atomic Swap | Instant (atomic) | 24/7/365 | Securitize qualification required
UniswapX RFQ (Securitize) | Near-instant | 24/7/365 | Feb 2026; whitelisted MMs (Flowdesk, Tokka Labs, Wintermute)
Standard USD Redemption | Within hours | US banking hours | Unlimited size; used to replenish Anchorage fiat buffer

2.6 Risk Implications: USDe as Single Point of Stablecoin Liquidity

The post-GENIUS Act structure means USDe’s liquid stablecoin pool is now the sole 24/7 mechanism for converting USDtb to USDT or USDC. This significantly elevates the importance of monitoring how whitelabel redemptions, USDtb-to-stablecoin swaps, and organic USDe redemptions interact when drawing from the same pool.

Kairos Research recommends:

Monitoring USDtb ↔ USDT/USDC swap volumes through the USDe facility as a leading indicator of liquidity demand

Ensuring the USDe facility has sufficient depth to service both organic USDe redemptions and USDtb swap demand concurrently

Monitoring the throughput and fee generation associated with the redemption facility to ensure it is the best use of USDe backing capital

Establishing minimum USDe liquid reserve thresholds that account for the facility’s role as the primary USDtb off-ramp

Stress-testing scenarios where the Anchorage fiat buffer is depleted and the USDe facility faces elevated demand simultaneously, as real data from stress events should give the Risk Committee confidence to loosen guardrails over time

Monitoring onchain utilization of whitelabel stablecoins (where they are used in DeFi, holder concentration, etc.)

Monitoring of mint/redeem activity both through independent liquidity buffers and the USDe pool

2.7 USDtb → USDT Facility

The USDe atomic swap facility effectively provides a USDtb → USDT pathway (via USDe as intermediary) at 4bps cost. However, this routes through USDe’s liquid pool, adding demand pressure. Ethena has confirmed there are no current plans to establish a direct USDtb → USDT facility, as the atomic swap is considered sufficiently cost-efficient. A dedicated facility, whether via market-maker agreements, DEX liquidity pools, etc, would reduce load on USDe’s reserves and provide a backup pathway if the facility is capacity-constrained.

2.8 BUIDL Unwinding Under Stress

Under the new structure, stress scenarios are more concentrated:

The Anchorage fiat buffer (~$10M) can be depleted by a single large redemption, and replenishment requires BUIDL redemption during US banking hours, creating a potential overnight gap.

The USDe facility becomes the only 24/7 stablecoin pathway under stress, and its capacity is bounded by USDe’s liquid reserves.

If BUIDL NAV deviates from $1 during a Treasury dislocation, both the Anchorage fiat replenishment and the underlying backing value are simultaneously impaired. We view this as very unlikely, but as stablecoin issuers become more structural buyers of short-term duration treasuries the contagion effects around crypto at large become more present.

3. Transparency and Attestation

3.1 USDtb Attestation Cadence and Custodian Concentration

Anchorage Digital Bank assumed USDtb issuance in October 2025 as sole custodian of all USDtb backing assets, committing to monthly reserve attestation reports by a Big Four accounting firm under AICPA standards. The most recent publicly available attestation, conducted by Deloitte under AICPA standards, covers January 31, 2026 and was published on February 26th. It confirms $876.7M in total reserve assets ($865.5M in BUIDL and $11.3M in FDIC-insured cash) against $875.1M in redeemable tokens outstanding (full report), closing a gap that had extended to approximately two months. While the cadence is improving, consistent and timely attestations remain a baseline requirement for institutional trust, and Kairos Research will continue to monitor this.

Kairos Research recommends the following thresholds:

Monthly attestations published within 30 days of the reporting period end

Any delay beyond 45 days triggers automatic pause on increasing whitelabel allocations within USDe backing

3.2 USDm Onchain Backing and Redemption Infrastructure

jupUSD provides transparent onchain proof-of-reserves via verifiable Solana token accounts (~99% USDtb, ~1% USDC), and USDm’s backing assets are now also verifiable onchain via a publicly accessible Coinbase wallet (0x343c18B0f1710B65cE33A7CE720b5D540215d343), with the mint/redeem contract at 0xE0406beE6D58bCd7C1cA78191b6fde9CA060F6f2. Both whitelabel assets now provide full onchain verifiability of their USDtb backing, and each maintains its own independent mint/redeem liquidity buffer sized at 10–20% of backing depending on the age of the asset and anticipated redemption volumes. These buffers exist independently of the Anchorage fiat facility, meaning whitelabel redemptions at typical scale are absorbed without drawing on USDe’s liquid pool at all, and only redemptions that exceed the buffer would flow through to USDe’s backing.

USDm’s smart contract infrastructure has also been independently reviewed by BGD Labs as part of the Aave V3 MegaETH listing process (full analysis), confirming no major technical blockers to integration and noting the 4-of-9 Safe multisig admin, HSM-protected minter keys, Coinbase Prime custody, and four independent audits (Quantstamp, Zellic, Spearbit, Pashov).

For ongoing monitoring, Kairos Research recommends:

Continued monitoring of the jupUSD and USDm backing addresses to confirm USDtb composition remains consistent

Integration of whitelabel stablecoin backing wallet and buffer levels into the Kairos Research dashboard, and other applicable dashboards from Risk Committee members

4. Redemption Flow and Liquidity Impact

4.1 How Whitelabel Tokens Enter USDe Backing

Step | Action
1 | User submits jupUSD/USDm for redemption
2 | Ethena receives whitelabel token into USDe backing
3 | User receives USDC/USDT from USDe’s liquid stablecoin reserves
4 | USDe backing now holds the whitelabel asset (~99% USDtb + ~1% USDC)
5 | Ethena may unwind the position to USDtb/USDC, or retain it if the yield environment supports it

4.2 Strategic Consideration: Net Liquidity Impact

The key question is how whitelabel redemptions affect USDe’s liquidity profile, since minting occurs independently and does not interact with USDe’s pool. The relevant scenarios are:

Low redemption scenario (whitelabel growth phase): Whitelabel supply is growing and net minting exceeds redemptions, meaning minimal whitelabel tokens flow into USDe’s backing. USDe’s liquid reserves remain unaffected, which is the likely state during expansion phases.

High redemption scenario (whitelabel contraction): Whitelabel supply is contracting with net redemptions, causing USDe to accumulate whitelabel tokens and pay out liquid stablecoins. This is the scenario that concentration guardrails are designed to manage.

The framework should perform well in both scenarios, and the guardrails discussed in Section 6 address the redemption case.

4.3 Risk Transfer and Yield Implications

Once a whitelabel asset enters USDe backing via redemption, the risk of holding the underlying USDtb transfers from the whitelabel program to USDe holders. USDe holders now bear BUIDL redemption risk, Treasury market risk, and multi-layer unwinding risk, and this risk transfer must be accompanied by a corresponding transfer of yield (Section 5).

4.4 Redemption Fees

Ethena has confirmed that USDtb ↔ USDT/USDC atomic swaps through the USDe facility carry an all-in cost of 4bps for whitelisted special-purpose addresses. Anchorage Digital Bank fiat redemption carries no fee (1:1). The standard rate for USDtb-backed whitelabel stables is a 4bps fee on mint/redeem with USDC/USDT. Fee design is an important lever for managing redemption behavior, and asymmetric fees could serve as an additional tool for managing liquidity during stress periods.

5. Yield Allocation

USDtb generates yield from BUIDL holdings (currently ~3.5–4% annualized, tracking the risk-free rate). When whitelabel assets backed by USDtb sit within USDe’s backing, yield attribution becomes important: the yield should accrue to sUSDe holders who bear the exposure, not remain with the whitelabel program or Ethena.

5.1 Confirmed: Yield Flows to sUSDe

Ethena has confirmed that USDtb yield from whitelabel assets held within USDe backing will be distributed to sUSDe holders. When a whitelabel redemption transfers USDtb exposure into USDe’s backing, USDe holders bear the associated risks including BUIDL redemption risk, Treasury market risk, and liquidity implications. This applies uniformly across all whitelabel assets, and a different allocation where yield stays with the whitelabel program or accrues to Ethena revenue would create a structural misalignment where USDe holders bear risk without receiving the corresponding return.

5.2 Backing Optimization Opportunity

This is where the proposal becomes particularly compelling from a portfolio perspective. USDe currently holds significant positions in USDT, USDC, PYUSD, which generates no yield for sUSDe holders. By holding USDtb-backed whitelabel stables in place of underperforming stablecoin positions, Ethena can improve the yield profile of the backing portfolio without introducing new credit risk. The whitelabel assets are economically equivalent to USDtb, which is itself backed by BUIDL, and the yield generated accrues to sUSDe. This represents a straightforward optimization: rotating from a non-yielding position into a yield-bearing one with equivalent credit quality, while simultaneously deepening the liquidity available to whitelabel partners.

There is also a broader ecosystem dimension worth noting. USDm is already listed on the Aave V3 MegaETH market, where it is the dominant supplied asset at ~$14.7M of the market’s ~$19M total size. Expanding USDm supply through whitelabel backing inclusion could help spur further activity on the MegaETH network, where USDm supply growth is a key performance indicator tied to MegaETH’s TGE event. This creates a positive feedback loop: deeper USDm liquidity on Aave attracts more borrowing activity and DeFi integrations on MegaETH, which in turn strengthens the utility and demand profile of the whitelabel asset sitting in USDe’s backing.

6. Concentration Guardrails and Liquid Integrity

6.1 Defining the Liquid Base

The relevant pool for assessing whitelabel concentration is USDe’s total liquid stablecoin reserves, excluding stablecoins deployed in lending markets. This includes both onchain holdings and custodial-attested stablecoin balances (USDC, USDT, PYUSD, and similar), but excludes positions in Aave (Ethereum, Plasma, Mantle) and Morpho vaults. While lending market positions are onchain and verifiable, they are not unconditionally withdrawable since withdrawals depend on pool utilization, and as currently demonstrated by USDT on Plasma’s Aave instance, full withdrawal may not be possible at all times.

Total USDe backing (~$6B) includes crypto derivatives and liquid staking positions that cannot service stablecoin redemptions, so concentration should be measured against the pool that actually matters for redemptions: liquid stables that can be paid out to redeemers.

6.2 Concentration Framework

Kairos Research proposes, and Ethena has agreed, that initial concentration guardrails should be in place as the whitelabel program launches. The aggregate share of whitelabel assets within USDe’s liquid stablecoin reserves (excluding lending market deployments) should be monitored and managed actively. We view this less as a rigid cap and more as a framework for building confidence: as cumulative redemption volume through the USDe pool reaches meaningful thresholds and the Risk Committee gains visibility into actual redemption patterns, these guardrails can be loosened or removed entirely, at which point allocation decisions can be left to Ethena’s discretion as part of their broader backing management.

The risk that whitelabel assets introduce is not credit risk but liquidity risk and duration mismatch. The underlying exposure is USDtb backed by BlackRock’s BUIDL fund, and the risk is liquidity timing: whitelabel assets require multi-step unwinding (whitelabel → USDtb → BUIDL → USDC) to convert back to liquid stables, and that process takes time. The guardrails ensure that the vast majority of the liquid pool remains in instantly redeemable form at all times, particularly in the early stages of the program.

The guardrails are asset-agnostic across all whitelabel tokens (jupUSD, USDm, and any future partners) since the underlying risk exposure is identical, and they scale automatically with the liquid base: if liquid reserves grow, the dollar-denominated headroom grows with it. Each whitelabel asset also maintains its own independent liquidity buffer at 10–20% of backing, which absorbs routine redemptions without touching USDe’s liquid pool.

6.3 Unwinding Policy

Equally important to concentration limits is how actively Ethena manages whitelabel positions down. When whitelabel tokens enter USDe backing through redemptions, Ethena has a choice: hold the position (benefiting from USDtb yield) or unwind it back to liquid stables (preserving redemption capacity). Ethena has confirmed a discretionary approach to unwinding, holding whitelabel assets or USDtb as long as the yield environment supports it. This is acceptable, particularly in the current rate environment where USDtb yield is competitive with market rates, and aligns with the broader thesis of optimizing backing composition for yield.

6.4 Total USDtb Exposure

Ethena already holds USDtb directly in USDe’s backing independent of the whitelabel program, and whitelabel redemptions add to that exposure. Ethena has indicated its USDtb concentration target will depend on the funding rate and onchain rate environment, prioritizing yield capture while maintaining healthy levels of liquid stablecoins to meet redemptions. Kairos Research will continue to monitor total USDtb concentration (direct + indirect via whitelabel) within the liquid pool as part of ongoing risk assessment.

7. Whitelabel Scaling Framework

The whitelabel program is in its early stages with two assets but has clear potential to scale rapidly, and an unconstrained expansion could degrade the liquidity profile that makes the proposal viable in the first place.

7.1 Tiered Growth Model

Tier | Aggregate Supply | Requirements | Governance
Tier 1: Launch | < $500M | Onchain PoR; current USDtb attestation; 2+ verified 24/7 BUIDL off-ramps | Risk Committee approval; monthly review
Tier 2: Growth | $500M–$2B | live monitoring dashboards; cumulative redemption volume through USDe pool; documented off-ramp stress test | Bi-weekly review
Tier 3: Scale | > $2B | proven multi-day redemption throughput; diversified whitelabel asset base | Dedicated sub-committee; weekly monitoring

7.2 Onboarding Criteria

Majority USDtb-backed (not USDe-backed, to avoid circular exposure)

Public real-time onchain proof-of-reserves with asset-level breakdown

Smart contract audit(s) from a reputable firm

Agreement on yield allocation framework (yield to sUSDe per Section 5)

Integration with Kairos Research monitoring dashboard and other applicable dashboards prior to activation

8. Risk Summary

Risk | Likelihood | Impact | Mitigation
Dual redemption pressure (USDe + whitelabel) | Medium | High | Concentration guardrails; active unwinding policy; diversified 24/7 BUIDL off-ramps; independent whitelabel liquidity buffers
USDtb attestation lapse (Anchorage) | Medium | Medium | Auto-pause on new allocations if >45 days stale
Whitelabel growth exceeding guardrail thresholds | Medium | High | Monitoring with auto-pause on breach; regular review as redemption data matures
USDm/whitelabel backing transparency gap | Low | Medium | Onchain wallet monitoring; dashboard integration; onboarding criteria require PoR
BUIDL NAV deviation during Treasury stress | Very Low | High | Diversified off-ramp channels; Anchorage fiat buffer; USDe liquid reserve thresholds

9. Recommendation

Kairos Research views this proposal as sound, and the economic equivalence argument, that holding jupUSD or USDm within USDe backing is functionally identical to holding USDtb/BUIDL directly, holds up. The exclusion of USDe-backed whitelabel assets from scope appropriately addresses circular exposure.

The opportunity to optimize USDe’s backing composition by holding whitelabel stables in place of underperforming positions is compelling as it improves the yield profile of the backing portfolio for sUSDe holders, deepens the liquidity pool available to whitelabel partners, and does so without introducing new credit risk. The key considerations are operational, specifically around liquidity timing, redemption infrastructure, and concentration management, all of which are addressed in this analysis.

Following engagement with the Ethena team, the key items have been resolved:

Yield allocation: confirmed, USDtb yield flows to sUSDe holders (Section 5)

Concentration guardrails: agreed as an initial framework, to be adjusted as redemption data matures (Section 6)

Anchorage attestation: improving, January 2026 attestation published February 26th, continued monitoring (Section 3)

Onchain proof-of-reserves for USDm: resolved, backing wallet and mint/redeem contract publicly verifiable onchain (Section 3)

Unwinding: discretionary approach accepted, Ethena retains flexibility to hold based on rate environment (Section 6)

USDtb concentration: rate-dependent, Ethena to manage as part of broader backing strategy (Section 6)

Fee structure: confirmed, 4bps on mint/redeem for USDtb-backed stables (Section 4)

Kairos Research recommends the inclusion of whitelabel stablecoin assets within USDe backing, subject to the concentration guardrails and governance safeguards outlined in this document, and will continue to monitor whitelabel redemption patterns, USDtb concentration, and attestation cadence as the program scales.

Prepared by Kairos Research for the Ethena Risk Committee

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