Censorship Resistance

How USDe furthers censorship resistance

Assets backing USDe remain in "Off-Exchange Settlement" institutional grade solutions at all times. The only time collateral flows between custody and exchange is to settle funding or realized P&L.

Ethena utilizes "Off-Exchange Settlement" (OES) providers to hold backing assets. This enables Ethena to delegate/undelegate collateral to centralized exchanges without being exposed to exchange-specific idiosyncratic risk.

While using an OES provider requires a technological dependence upon the OES provider, it does NOT mean counterparty risk has simply been transferred from the exchange to the OES provider. OES providers typically, where not using an MPC solution, employ a bankruptcy-remote trust framework to ensure the OES provider's creditors have no claim to the assets. In the case of an OES provider failing, these assets outside the provider's estate and not exposed to the credit risk of the custodian.

All supported OES providers are non-US-based. This offers a unique risk profile versus custodying funds with an exchange or holding fiat or treasury bonds in a US bank account or with a US based custodian. Treasury bonds and even stablecoins holding said treasuries present significant censorship risk. Note: Due to the current regulatory environment in the US, and with a strong focus on global regulatory compliance, we have chosen not to work with US-based service providers at this time.

In summary, while the use of OES providers may be viewed as more centralized vs fully onchain solutions, they represent very different censorship risk profiles than onchain stablecoins holding U.S Treasuries in a US bank account, or the opaque risk of holding assets on a centralized exchange. Empirically, Ethena's integrated providers for custody services have never lost a dollar of users funds compared to the $7bn lost in DeFi hacks, and >$15bn in CeFi insitutions last cycle.