Germany’s financial watchdog, BaFin, has prohibited the public sale of Ethena GmbH’s USDe token, citing regulatory violations and potential securities law breaches.
BaFin claims USDe, a synthetic dollar, fails to comply with the European Union’s Markets in Crypto-Assets Regulation (MiCAR). The regulator also alleges the company has been selling unregistered securities in Germany.
As part of the enforcement action, BaFin has ordered Ethena to freeze USDe’s reserve assets, shut down its website, and stop onboarding new customers. Additionally, BaFin has assigned a representative to oversee the company’s operations.
Regulatory Concerns Over USDe and sUSDe
BaFin suspects Ethena GmbH has been selling securities without the required prospectus, specifically through sUSDe tokens issued by Ethena OpCo. Ltd. The regulator noted that USDe and sUSDe are linked, as investors can swap one for the other.
While the regulator has banned new token sales and issuance, secondary market trading remains unaffected.
Ethena Responds to the Ban
Ethena Labs reassured users on social media platform X that USDe’s backing remains intact and that redemptions can still be processed through Ethena BVI Limited.
The firm had applied for MiCA approval on July 29, 2024, hoping to operate under a transitional framework. However, BaFin rejected the application on March 21, citing serious compliance issues and deficiencies in the company’s structure.
BaFin also acknowledged that 5.4 billion Ethena tokens are in circulation, but noted that many were minted outside of Germany and before MiCAR took effect.
Institutional Investment in Ethena Continues
Despite regulatory challenges, Ethena continues to secure institutional backing. In February 2024, the company raised over $100 million to develop iUSDe, a new token aimed at institutional investors.
Ethena also partnered with World Liberty Financial, a decentralized finance (DeFi) protocol founded by former U.S. President Donald Trump in December 2024. As part of the deal, World Liberty Financial acquired 500,000 ENA governance tokens.
Additionally, on February 26, crypto exchange MEXC announced a $20 million investment in Ethena’s USDe to support stablecoin adoption.