Key Takeaways
- As part of the measures, BaFin has frozen the company’s asset reserves, restricted executive access, and barred new client onboarding.
- However, the regulator has clarified that secondary market trading of USDe will not be affected
Germany’s financial regulator, BaFin, has imposed strict measures on Ethena GmbH, preventing the company from offering its USDe token to the public.
The enforcement action follows a probe that revealed regulatory violations, including the distribution of financial instruments without proper authorization. As part of the measures, BaFin has frozen the company’s asset reserves, restricted executive access, and barred new client onboarding.
Ethena GmbH, based in Frankfurt, had applied for regulatory approval under the European Union’s Markets in Crypto-Assets Regulation (MiCA) framework in July 2024. However, BaFin rejected the application due to operational weaknesses and noncompliance with key financial requirements, such as asset reserves and capital adequacy. Despite this, the company proceeded with issuing the USDe token in Germany, prompting BaFin to intervene.
In addition to concerns surrounding USDe, BaFin is scrutinizing Ethena’s associated sUSDe token, which is issued by Ethena OpCo. Ltd. The regulator suspects that sUSDe tokens were marketed as financial instruments without the legally required prospectus. These tokens, which investors receive in exchange for USDe, offer returns, raising questions about whether they constitute unregistered securities under German law.
“BaFin has reasonable grounds to suspect that Ethena GmbH has marketed the sUSDe tokens as financial instruments without the required prospectus,” the regulator stated, emphasizing the importance of investor protection and transparency.
The enforcement measures taken by BaFin include freezing Ethena GmbH’s asset reserves held by depository agencies and blocking the company from launching new business activities, including through its website. However, the regulator has clarified that secondary market trading of USDe will not be affected, though direct redemptions through Ethena GmbH remain restricted for now.
Following BaFin’s announcement, Ethena GmbH responded by stating that no customer assets had been frozen and that USDe remains fully backed by reserves. The company also confirmed that its subsidiary, Ethena (BVI) Limited, continues to issue the token outside of Germany without interruption. Ethena indicated that it is actively exploring alternative regulatory frameworks to ensure its operations comply with applicable laws.
The market reaction to the regulator’s decision was swift, with Ethena’s ENA token experiencing a 6.5% decline. Despite the setback, the company remains committed to finding a resolution and adapting its business strategy to navigate the evolving regulatory landscape.
