Ethena Labs proposed using reserve assets to buy back USDe if the secondary market price decouples from the peg.

According to Mars Finance, Ethena Labs recently proposed a new mechanism to support orderly market liquidity and stability by repurchasing and burning USDe when its price in the secondary market is significantly lower than its pegged value. This proposal is a risk management response to events such as the brief and severe depegging of USDe to $0.65 during periods of extreme market volatility on the Binance exchange. Core Mechanism Repurchase Conditions: Activated only in the event of "severe market dislocations," with an initial price threshold set at USDe trading at $0.99 or lower. Funding Source: Repurchase using stablecoins (such as USDT) available in USDe's existing reserves. Funding Amount: Proposed use of 1.2% of USDe's total reserve assets, approximately $95 million based on the current USDe supply. Operation Method: Repurchase will be executed by placing buy orders on centralized exchange (CEX) order books, using an off-chain solution, without directly depositing reserve assets into the exchange. Immediate Burn: Repurchased USDe will be burned immediately. The net impact of this mechanism will be: Increased collateral ratio: Purchasing USDe below $1 captures price spreads, increasing protocol reserves and thus improving the collateral ratio of USDe. Reduced supply: Burning USDe reduces its circulating supply. Price support: Providing direct buying support in the secondary market when the market is under pressure, stabilizing the USDe price. Gas fee mitigation: Ethena can use the captured price spreads to cover high gas fees, ensuring arbitrage operations can continue even during network congestion, which was one of the reasons market makers were restricted on October 10th. Background: During the market volatility on October 10th, although Ethena's core minting/redemption functions operated normally and processed over $2 billion in instant redemptions within 24 hours, the lack of direct USDe minting/redemption integration on Binance and deposit/withdrawal issues encountered by traders on CEXs caused a severe de-pegging of the USDe/USDT spot price on Binance. This proposal aims to proactively intervene in the secondary market to avoid the "cyclical loop of USDe liquidations" effect caused by similar events, and to generate net benefits for the protocol. The Risk Committee members have received this proposal and will provide further advice.