BaFin Bans Public Sales of Ethena GmbH's USDe Synthetic Dollar

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.

German financial regulatory authority BaFin 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.

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

“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 regulator said.

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

Ethena GmbH also commented on the development, adding that 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.

The financial regulator further noted that around 5.4 billion Ethena tokens are currently in circulation. However, many of these tokens were minted outside of the German jurisdiction and before MiCA took effect.

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

Ethena reportedly 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 former 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.