Key Takeaways:
Experts suggest the suspension may drive crypto firms to innovate in risk management and streamline internal compliance—potentially setting new industry benchmarks.
The regulator’s intervention is seen not merely as a punitive measure but as a wake-up call to reassess operational resilience in the evolving digital asset landscape.
Market observers believe that such rigorous enforcement might restore investor confidence and encourage clearer standards across synthetic token markets.
BaFin, Germany’s financial regulator, banned all public sales of Ethena GmbH’s USDe token this week, citing flaws in the approval process and violations of the European Union’s Markets in Crypto-Assets Regulation (MiCAR).
The regulator outlined several immediate actions against Ethena GmbH to enforce the ban.
According to BaFin, the synthetic dollar token had been offered as an unregistered security in Germany, prompting the authority to restrict its operations without delay.
BaFin Orders Asset Freeze and Website Shutdown for USDe Token
In its announcement, BaFin instructed Ethena GmbH to freeze the reserve assets backing the USDe token and halt all new customer registrations.
The company must also shut down its website, and a special representative has been appointed to oversee compliance with these directives.
“The BaFin also has reasonable grounds to suspect that Ethena GmbH in Germany sells securities in the form of sUSDe tokens from Ethena OpCo. Ltd. without the required prospectus,” the regulator said.
“The USDe and sUSDe tokens are interconnected in such a way that investors can receive a sUSDe token in exchange for a USDe token,” it added.
Despite the prohibition on primary sales and issuance, secondary market trading of USDe remains unaffected by the ban.
BaFin identified “serious deficiencies” in Ethena GmbH’s approval process, including noncompliance with MiCAR’s capital and asset reserve requirements.
Ethena GmbH had been operating under a transitional provision that allows issuers of asset-referenced tokens to continue business while awaiting regulatory approval.
The company applied for authorization on July 29, 2024, a day before the deadline, and has been issuing USDe in Germany since June 28, 2024.
Currently, approximately 5.4 billion USDe tokens are in circulation, with a substantial portion issued outside Germany before MiCAR took effect.
To safeguard customer interests, BaFin has ordered the company’s asset reserves to block and restrict the authority of its managing directors over those funds.
Holders of USDe tokens cannot redeem them directly with Ethena GmbH, though trading on secondary markets continues as normal.
BaFin’s statement also raised concerns about the company issuing sUSDe tokens, suggesting they could constitute unregistered securities.
The tokens are linked to USDe, allowing investors to exchange them while receiving additional returns.
The regulator is now considering further enforcement actions, which could include a complete ban on the public offering of these securities.
BaFin is overseeing the authorization process in collaboration with the European Central Bank (ECB), the European Banking Authority (EBA), and the European Securities and Markets Authority (ESMA).
Further details will be provided upon completion of the licensing process.
Ethena Defends USDe Token Amid BaFin Ban
Following BaFin’s ban on USDe in Germany, Ethena Labs reassured users that redemptions remain unaffected through its British Virgin Islands-based entity, Ethena BVI Limited.
The company, addressing the situation on X, stated that while its German subsidiary’s MiCAR application was denied, USDe remains fully backed.
“We are disappointed by this decision but will continue evaluating alternative regulatory frameworks,” Ethena wrote.
The firm also dismissed claims that its assets were frozen, clarifying that all funds remain accessible.
It plans to update its terms in the coming week to reflect the regulatory developments.
Ethena’s regulatory challenges come as institutional interest grows.
Recent investments include a $20 million backing from MEXC and a 500,000 ENA token purchase by World Liberty Financial.
BaFin Tightens Oversight on Synthetic Assets Across Europe
BaFin’s decision reflects the regulator’s cautious approach towards crypto assets operating within Germany’s jurisdiction.
Its ban on Ethena’s USDe token highlights the tightening regulatory grip on stablecoins and synthetic dollar tokens in Germany and across Europe.
With MiCAR enforcement ramping up, stablecoin and synthetic asset issuers will face increased scrutiny over compliance with capital, reserve, and disclosure requirements.
The outcome of BaFin’s assessment of Ethena GmbH could set a precedent for how synthetic dollar tokens are regulated under MiCAR across the EU.
Frequently Asked Questions (FAQs)
Counterintuitively, yes. By enforcing strict compliance standards early, BaFin creates a more predictable environment where legitimate crypto projects can thrive without unfair competition from operators who bypass proper authorization channels.
Neither—it demonstrates MiCAR’s intentional interpretative space. Germany’s interpretation reveals how the regulation creates room for national authorities to calibrate enforcement based on local market conditions and risk appetites.
The latter. This action positions Europe as asserting regulatory independence from both American permissiveness and Chinese restriction, establishing a distinct “third way” in global crypto governance.
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