- BaFin found serious deficiencies in Ethena GmbH’s MiCA compliance, halting the public sale of its USDe token within Germany.
- The regulator ordered custodians to freeze USDe’s reserve assets, raising concerns over asset-referenced token issuers in the European Union.
- Despite regulatory challenges, Ethena continues to attract institutional investments, including a $100 million funding round for its iUSDe token.
Germany financial watchdog, BaFin, has taken a hard stance against Ethena GmbH, banning public sales of its USDe token over regulatory violations. Citing major organizational flaws and non-compliance with the EU’s Markets in Crypto-Assets Regulation, BaFin has frozen the token’s reserve assets and denied Ethena’s regulatory approval.
BaFin Takes Immediate Action Against Ethena GmbH
BaFin has prohibited Ethena GmbH from further public sales of its USDe token in Germany. The financial regulator cited significant organizational shortcomings and non-compliance with the Markets in Crypto-Assets Regulation (MiCA). The decision, announced on March 21, follows an in-depth review that found the firm lacked sufficient asset reserves and failed to meet capital adequacy standards.
To prevent further risks, BaFin imposed enforceable supervisory measures. Custodians holding USDe’s reserve assets were ordered to freeze them, limiting the token’s circulation within the country. Despite 5.4 billion USDe tokens already in circulation, BaFin emphasized that a significant portion was minted outside Germany before MiCA came into effect.
GmbH’s Regulatory Approval Denied
Ethena GmbH applied for MiCA approval on July 29, 2024, expecting to operate under transitional rules. However, BaFin denied the request, citing severe deficiencies in business organization and failure to meet regulatory standards. The regulator’s scrutiny highlights the EU’s increased enforcement of stablecoin regulations, which has led to delistings of non-compliant tokens on major European exchanges.
MiCA’s strict framework has posed difficulties for several stablecoin issuers. Some exchanges removed Tether’s USDT over compliance concerns, though regulators have not yet deemed it non-compliant. The crackdown underscores the EU’s focus on regulating asset-referenced tokens to maintain financial stability.
Ethena Institutional Investment and Future Plans
Despite regulatory setbacks, Ethena continues to attract investment. In February 2024, the company secured $100 million in funding to launch iUSDe, a new token designed for institutional investors. Ethena also partnered with World Liberty Financial, a DeFi protocol founded by U.S. President Donald Trump, which acquired 500,000 ENA governance tokens as part of the deal.
BaFin’s enforcement highlights the challenges stablecoin issuers face under MiCA. Regulatory authorities are prioritizing oversight to ensure compliance, making it more difficult for firms like Ethena to operate without meeting strict financial and organizational standards. The EU’s approach signals continued regulatory scrutiny in the digital asset space.
