German financial regulator prohibits sales of Ethena's USDe

BaFin, the German financial regulatory authority, has prohibited all public sales of Ethena GmbH’s USDe (USDe) — a synthetic dollar — claiming the token violates the European Union’s MiCAR regulations and accused the firm of selling unregistered securities in the region.

BaFin ordered Ethena to freeze the reserve assets that back the token, close down the website portal, and ordered the firm to stop taking new customers, the regulator wrote in an announcement.

BaFin also appointed a representative to monitor the ongoing situation with Ethena. In a translated statement, the regulator wrote:

"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 USDe and sUSDe tokens are interconnected in such a way that investors can receive a sUSDe token in exchange for a USDe token,” the statement reads.

Despite the ban on primary sales and issuance of the token, secondary sales of the token will not be prohibited or affected, the regulator said.

In a statement on X, Ethena Labs said the backing of USDe remains unaffected, and the token can still be redeemed via Ethena BVI Limited.

Ethena GmbH files for MiCA approval

Ethena submitted a request for regulatory approval under MiCA on July 29, 2024, and the firm expected to be “grandfathered” into the existing regulatory framework.

However, BaFin denied the application on March 21, citing “serious deficiencies in the business organization” and a lack of compliance with the MiCA framework.

BaFin acknowledged that there are currently around 5.4 billion Ethena tokens in circulation. However, many of these tokens were minted outside of the German jurisdiction and before MiCA took effect.

Ethena attracts investment for its products

Ethena continues to attract institutional investment for its products, risks associated with synthetic dollars notwithstanding.

Ethena raised over $100 million from investors in February 2024 to launch a new token called iUSDe geared toward institutional investors.

The firm also partnered with World Liberty Financial, a decentralized finance (DeFi) protocol started by US President Donald Trump in December 2024.

As part of the agreement, World Liberty Financial purchased 500,000 ENA tokens — the governance token of Ethena.

On Feb. 26, the MEXC crypto exchange announced a $20 million investment in Ethena's USDe to promote stablecoin use.

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