Germany’s financial authority BaFin has ordered Ethena GmbH to stop issuing its synthetic stablecoin USDe, citing major compliance failures under the EU’s Markets in Crypto-Assets Regulation (MiCA).
Ethena Labs, known for its $5.4 billion synthetic dollar token, is now barred from offering USDe to the public within Germany. BaFin flagged critical issues in Ethena GmbH’s business structure, including insufficient asset reserves and a failure to meet capital requirements. The agency also suspects the firm issued unregistered securities in the form of sUSDe tokens without filing a mandatory prospectus.
Although the company had submitted a MiCA license application before the regulatory deadline last year, BaFin’s investigation uncovered what it described as “serious deficiencies,” which led to an immediate halt in token issuance. Under MiCA’s transitional rules, firms could operate while awaiting approval, but that grace period ends once violations are found.
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Ethena Responds and ENA Token Drops
In response, Ethena Labs stated that the German entity is just one part of its broader strategy and that core operations continue via its BVI-based arm, Ethena (BVI) Ltd. The team clarified that assets have not been frozen and that redemptions remain active for current users outside the EU.
Despite the reassurance, the market reacted negatively. Ethena’s governance token, ENA, dropped by 6.5% within 24 hours of BaFin’s announcement, according to CoinMarketCap.
The blockchain’s model relies on crypto assets like BTC and ETH, paired with perpetual short positions to stabilize USDe’s value near $1. This approach, while novel, does not rely on traditional fiat reserves, which has drawn scrutiny under MiCA’s asset-backed token rules.
BaFin is now coordinating with the European Central Bank and other EU regulators, signaling stricter enforcement moving forward. For Ethena, the ruling puts its European expansion on hold and casts doubt on the future of synthetic stablecoins under MiCA’s legal framework.
