German Regulator Halts USDe Token Sales by Ethena GmbH Over Issues

The German financial regulatory authority, BaFin, has ordered the suspension of all public sales of the USDe token issued by Ethena GmbH. BaFin’s decision stems from concerns that the token violates European Union regulations and potentially constitutes unregistered securities.

Ethena GmbH, the Frankfurt-based issuer, has been accused of significant compliance failures, which led to the ban on the primary offering of the token.

BaFin Halts USDe Token Sales by Ethena GmbH

BaFin’s order prohibits Ethena GmbH from selling the USDe token to the public. The German regulator has also restrained the company from using the reserves to support the token and has closed the online platform that the firm was using.

Furthermore, there is no option for Ethena GmbH to accept new customers anymore, as BaFin has prohibited it. These measures are intended to slow down any developments of events that are associated with the sale and distribution of the token relative to the legal rules set by the MiCAR within the European Union.

Consequently, in its announcement, BaFin has expressed concerns regarding the matters wherein Ethena GmbH offered securities without prior registration in Germany. BaFin, for their part, believe that the company is engaging in securities selling without a prospectus, a violation of German Securities Law. The regulator also made mention of the USDe token which represents a synthetic dollar that is associated with another token, sUSDe. This interconnection may potentially deepen the regulation issue even more.

Investigation of Token Issuance Process

BaFin points out that Ethena GmbH has failed to adhere to some of the standard procedures in its approval process that involves issuing USDe tokens. The first question that has been asked there is the lack of compliance with MiCAR, the new regulation of the European Union on crypto-assets.

According to BaFin, the company failed to meet crucial requirements such as providing the necessary asset reserves and adhering to capital standards. The regulator’s action comes as part of its oversight responsibilities under the MiCAR framework, which aims to bring greater stability and transparency to the crypto market.

Ethena GmbH, which began issuing the USDe token in June 2024, had applied for regulatory approval under MiCAR. However, BaFin has already expressed concerns about the company’s business organization, suggesting it did not meet the standards set by the regulation. The regulator has also pointed out that some of the tokens were issued before MiCAR came into effect, which could further complicate the approval process.

Impact on Customers and Token Holders

As part of the regulatory measures, BaFin has taken steps to freeze the reserve assets of Ethena GmbH, which back the USDe token. This will affect customers who may wish to redeem their tokens. The company’s platform for redeeming the tokens has been temporarily blocked as a result of the regulator’s actions. However, the suspension only applies to new sales and redemptions, while the secondary market for the token remains unaffected.

BaFin has appointed a special representative to monitor the situation and ensure compliance with the regulator’s directives.

The regulator is continuing to review the case and will provide further updates once the licensing process is concluded. BaFin has also made it clear that it is actively working with other European bodies like the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA) to address any potential issues regarding the USDe token.