Ethena protocol has started expanding into real-world asset (RWA) tokenization. The goal is to boost yields and reduce dependence on crypto market cycles. The firm behind the yield-paying stablecoin $USDe announced this move on Friday.

The first asset category under evaluation is AAA-rated Collateralized Loan Obligations (CLOs). These sit at the top of the capital stack. Historically, AAA-rated CLOs have a zero default rate across the entire asset class.

What are CLOs?

Collateralized Loan Obligations are pools of loans from individual companies. Asset managers handle these pools. Think of it like an ETF that tracks different stocks. Instead of stocks, CLOs track pooled corporate loans. The AAA rating is the highest score agencies like Moody’s assign. It means the product has very low default risk or high credit quality.

Why Ethena is betting on CLOs

Beyond credit quality, Ethena wants an RWA asset with high liquidity and low downside risk. The team says CLOs, especially the Janus Henderson Anemoy AAA CLO Fund, fit these criteria.

During the COVID-19 crisis and high Fed interest rates, the broader CLO sector only fell 8% and 2%, respectively. In both cases, the S&P 500 Index dropped 33% and 22%. For a 5% drawdown, Ethena found it took CLOs 5 to 8 days to recover. Compare that to crypto. It has been about eight months since Bitcoin’s contraction began. Bitcoin is now down over 50% from its $126,000 peak.

Breaking the crypto correlation

Ethena’s $USDe currently uses crypto funding rates for yield. Higher funding rates during bull markets lead to higher yields. But bear markets compress funding rates and yields. This gets worse when recovery takes longer. That is why Ethena already diversified reserve assets into RWA, starting with BlackRock’s BUIDL, which uses U.S. Treasury bonds.

Now, Ethena plans to expand RWA exposure. It will allocate $310 million to the Janus Henderson Anemoy AAA CLO Fund. According to the team, this breaks the yield correlation with crypto market swings. It should offer more stable returns. AAA CLO yields are driven by short-rate policy, credit-spread dynamics, and loan market structure. None of these are tied to crypto sentiment or positioning.

The move follows Ethena’s recent partnerships with Coinbase and Brazil’s largest exchange, Mercado Bitcoin. It remains unclear if these efforts will boost demand for $USDe. Demand has dropped sharply since last October.