Synthetic dollar developer Ethena Labs has received approval to create a USDeFRAX liquidity pool in collaboration with Frax Finance, aimed at diversifying FRAX stablecoin yield.

The Singularity Roadmap proposal from Ethena Labs has been approved, allowing the protocols to establish a USDeFRAX pool with a $250 million ceiling on the defi stablecoin exchange Curve.

Ethena Labs has recognized the FRAX team as leading builders in the DeFi space and looks forward to collaborating to grow the onchain dollar economy in the upcoming months.

USDe’s issuer and Frax Finance are working towards providing robust on-chain dollar liquidity, despite concerns raised about similarities between Ethena Labs’ product and Terraform’s algorithmic stablecoin UST.

Fantom developer Andre Cronje has highlighted the risks associated with USDe, particularly its peg system which relies on collateralized positions to maintain parity with the U.S. dollar.

Following the integration of Bitcoin (BTC) to support its peg, CryptoQuant founder Ki Young Ju has also expressed concerns about a potential crypto contagion, drawing parallels to the downfall of UST and Terraform.

Despite being a contentious defi stablecoin, USDe has seen significant user demand and has surpassed a $2 billion market cap since its launch in February. Ethena Labs exclusively offers the U.S. dollar-pegged token on Ethereum’s mainnet.

While the protocol faced a $290,000 security exploit shortly after its launch, the issue was quickly addressed. Ethena Labs has continued to enhance USDe integration and recently airdropped its governance token ENA with 750 million free tokens for early supporters and participants.

For further insights, you can also read about how a developer has raised concerns about Ethena potentially becoming the new UST.

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