Key Highlights
- Kraken Custody has been selected to manage and secure the backing assets for Ethena’s USDe synthetic dollar.
- The assets will be held in segregated, bankruptcy-remote cold storage through Kraken’s state-chartered bank infrastructure.
- Starting this month, the partnership will implement weekly Proof of Reserves and monthly attestations to ensure full transparency.
Kraken Institutional and Ethena Labs announced today that Kraken Custody will hold the backing assets for the USDe stablecoin. After a thorough review, the Ethena Risk Committee approved the partnership to use Kraken’s infrastructure for secure asset management aimed at institutions.
The collaboration is intended to improve the security and transparency of USDe’s reserves by using a qualified, state-chartered bank custodian.
Institutional storage architecture
This Ethena Risk Committee is an independent group elected by DAO governance to manage protocol risk factors. Under the partnership, the underlying assets for the USDe will be warehoused in isolated, cold-storage vaults on a one-for-one basis.
This will make the setup bankruptcy remote, such that the underlying assets are shielded from the balance sheet risk of the custodian. Kraken Custody is a U.S. state-chartered bank, providing a regulatory framework suited for complex institutional workflows and strict security needs.
Efforts for risk management
Ethena attempts to maintain a risk management approach for its synthetic dollar, USDe. By adding Kraken Custody, the protocol gains a layer of protection that includes hardware security modules and multi-party computation.
Ethena founder Guy Young said, “For Ethena, custody is a core risk decision. Selecting Kraken Custody reinforces the Ethena Risk Committee’s commitment to scaling USDe on infrastructure built to meet institutional expectations. The depth of Kraken Custody’s regulatory framework, operational controls and security architecture closely aligns with how we define the stewardship of USDe’s backing assets.”
Bridging DeFi and TradFi
This partnership reflects a wider trend of decentralized protocols working with regulated financial institutions to connect DeFi with traditional finance. Gurpreet Oberoi, Head of Kraken Institutional, said, “This engagement reflects our ability to support complex institutional workflows with robust security and compliance standards. Kraken Custody brings together regulatory clarity, robust controls and deep operational expertise to support critical infrastructure for digital asset markets.”
Kraken Custody will start participating in Ethena’s transparency protocols this month. This will be combined with the monthly attestations by the custodians and the weekly “Proof of Reserves” reports, ensuring the community at large can access the verifiable information on the USDe reserves.
Increasing institutional reputation
This partnership is part of efforts geared toward ensuring the associated functionality with the stablecoin gets enhanced. Ethena is appointing Kraken Custody as a move to increase the institutional reputation of the USDe.
Through the use of a reputable custodian, the network will be able to minimize risks that may arise as a result of counterparty risk. This move shows the importance of regulated custody services in the development of the digital asset industry.
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