Synthetic stablecoins are returning to the forefront this year as confidence in financial engineering aimed at mitigating volatility through delta-hedged strategies builds.

On Wednesday, SUI Group, which offers access to the Sui blockchain, announced the development of suiUSDe and USDi, the first native stablecoins within the Sui ecosystem. This initiative is a collaboration with Ethena Labs and the Sui Foundation.

The two stablecoins are designed to achieve a dollar peg through different mechanisms. USDi will be fully collateralized by tokenized shares of BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), a regulated money market fund operating with short-term U.S. Treasury bills and cash equivalents.

Conversely, suiUSDe will employ a synthetic dollar model utilizing a delta-neutral hedging strategy, combining cryptocurrency collateral with short futures positions to maintain its value.

This collaboration with Ethena is significant, as USDe is recognized as the leading synthetic dollar currently in the market. It upholds its peg through collateralized positions hedged with perpetual futures contracts — a model that has contributed to its status as a capital-efficient alternative to fiat-collateralized stablecoins.

As reported by CoinMarketCap, USDe has climbed to become the third-largest stablecoin globally, boasting a market cap of $14.8 billion, having more than doubled since July.

Market Cap Growth The Ethena USDe market cap has more than doubled in recent months. Source: CoinMarketCap

Ethena’s ecosystem plays a crucial role in a recent $2 billion shelf registration by Mega Matrix, a publicly traded holding company that has been accumulating Ethena’s governance token, ENA. Acquiring ENA could give Mega Matrix exposure to revenue from the USDe synthetic dollar protocol.

The rollout of native stablecoins may represent a crucial advancement for Sui, regarded as one of the swiftest-growing layer 1 blockchains. Designed by Mysten Labs, Sui enhances scalability and efficiency through parallel transaction processing.

Currently, Sui is ranked as the 15th-largest blockchain by market capitalization, approximately valued at over $13 billion.

Global Stablecoin Market Exceeds $300 Billion

The worldwide stablecoin market recently achieved a new benchmark, surpassing $300 billion in total circulating value, according to CoinMarketCap data.

Even as synthetic stablecoins expand swiftly, they constitute a mere fraction of the overall market, which largely continues to be dominated by traditional, fully collateralized tokens.

This sector’s recent growth has been partly fueled by regulatory advancements in the United States. The GENIUS Act’s passage, which sets reserve and reporting standards for fully collateralized dollar-backed stablecoins, is viewed as a beneficial move for industry transparency and institutional uptake.

Despite escalating competition, Tether’s USDt (USDT) and Circle’s USDC (USDC) still command the market. USDt registered $19.6 billion in net inflows during the third quarter, trailing by USDC with $12.3 billion and Ethena’s USDe at $9 billion, according to industry data.

Stablecoin Inflows Stablecoin inflows over the past 90 days. Source: RWA.xyz

Sui is venturing into a competitive stablecoin landscape, where Ethereum retains dominance, hosting over half of the total stablecoins in circulation.