Germany’s financial regulator, BaFin, has intervened to stop Ethena GmbH, a subsidiary of the Frankfurt-based Ethena Labs, from offering its USD-pegged stablecoin, USDe, to the public.
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The halt was prompted by BaFin’s discovery of significant issues with the company’s authorization process for the stablecoin, leading the regulator to instruct Ethena to freeze its USDe asset reserves.
The conflict centers around the European Union’s regulatory framework for digital assets, MiCA (Markets in Crypto-Assets), which governs the issuance of asset-referenced tokens like USDe. According to the MiCA rules, issuers of such tokens, if they are not credit institutions, must obtain authorization to issue their tokens. Ethena had submitted an application for authorization before the deadline of July 30, 2024, which would allow them to continue operating under a transitional arrangement until their application was approved or denied.
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However, BaFin has raised concerns that Ethena began offering USDe earlier than allowed, specifically on June 28, 2024, well before the deadline. The agency also suspects that Ethena may have marketed its Ethena Staked sUSDe token as a security without the necessary prospectus, violating regulations in Germany.
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Ethena Labs responded by acknowledging the regulatory setback, stating that it had been exploring various global jurisdictions to comply with different frameworks. The company emphasized that no assets had been frozen, and that the decision would not affect the operation of USDe through its subsidiary, Ethena BVI Limited. USDe continues to rank as the third-largest USD-pegged stablecoin by market supply, following USDC and USDT. Despite the setback with BaFin, Ethena plans to explore other regulatory pathways for its stablecoin.
Alexander Stefanov
