Story Highlights
- BaFin bans Ethena’s USDe token for MiCAR violations.
- Ethena accused of selling unregistered securities in Germany.
- Ethena Labs claims USDe remains redeemable via BVI entity.
Germany’s financial watchdog, BaFin, has taken strict action against Ethena GmbH, a Frankfurt-based crypto firm. The regulator has banned the public sale of Ethena’s USDe token, a synthetic dollar. The entity violated the European Union’s Markets in Crypto-Assets Regulation (MiCAR). BaFin has reason to believe Ethena conducted illegal activities by selling securities that contained no proper registration.
The regulatory authority BaFin has discovered severe flaws in the way Ethena approves its tokens. The regulatory authority commanded the company to maintain all its asset reserves frozen. The supervisory authority BaFin both controlled the asset management authority of the company executives and designated a special compliance oversight representative. The regulatory actions focus on protecting investors as well as implementing regulations.
Ethena Labs responded on the X platform that backing for USDe tokens continues without disruption. Users maintain the ability to exchange tokens through Ethena BVI Limited while BaFin imposes restrictions. Ethena states that the token stability is protected by an algorithm which implements hedging derivatives. BaFin has voiced concern about Ethena Labs’ capacity to comply with MiCAR requirements. Because it does not meet the requirements for asset reserve management and capital compliance.
BaFin Investigates sUSDe Tokens for EU Securities Breach
MiCAR entered into force in 2024 and mandates that asset-referenced tokens must gain regulatory approval for public selling. Ethena along with other issuers received permission to maintain operations through an approval transition rule. Ethena submitted its authorization request to BaFin on July 29, 2024 but regulatory standards have now shown that the company failed to meet essential requirements.
USDe token holders should not try to exchange their tokens for direct payment from Ethena GmbH. Trading activities on secondary markets remain unchanged. BaFin conducts an investigation into sUSDe linked tokens from Ethena because they generate extra value for token investors. The regulator believes the linked token meets EU security classifications raising additional legal challenges for Ethena.
The regulatory actions by BaFin against Ethena mark the rising government oversight within the crypto market space. Businesses operating in cryptocurrency must prove absolute compliance with legal regulations to prevent facing regulatory action from authorities. Both the industry sector along with Ethena must observe BaFin’s response to the company as well as any upcoming legal actions against Ethena.
