BaFin Intervenes to Stop Ethena Labs From Offering Its USD-pegged Stablecoin, USDe, to the Public

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.

Germany’s financial regulator, BaFin, has intervened to halt Ethena GmbH, a subsidiary of the Frankfurt-based Ethena Labs, from offering its USD-pegged stablecoin, USDe, to the public.

The move follows BaFin’s discovery of issues with the company’s authorization process for the stablecoin, leading the regulator to instruct Ethena to freeze its USDe asset reserves and cease offering the stablecoin.

The conflict arises from the European Union’s new regulatory framework for digital assets, MiCA (Markets in Crypto-Assets), which came into effect on August 18, 2024. MiCA governs the issuance of asset-referenced tokens such as 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.

However, BaFin claims that Ethena began offering USDe earlier than allowed, specifically on June 28, 2024, which would fall afoul of the regulator’s mandate to supervise the legal and compliant operation of financial services in Germany.

Additionally, BaFin suspects that Ethena may have marketed its Ethena Staked sUSDe token as a security without the mandatory prospectus required under German law. This suspicion arose from Ethena’s own website, which BaFin notes appears to be targeted at a German audience.

"The financial supervisory authority, in accordance with the legal mandate to supervise the legal and compliant operation of financial services, is reacting to a threat to the proper functioning of the financial supervisory sphere in Germany arising in connection with the new EU legal framework for crypto services (the ‘Markets in Crypto-Assets Regulation’ or ‘MiCA’), to intervene in order to restore proper functioning and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"In this specific case, BaFin is assuming financial supervisory powers in accordance with Section 15 of the German Banking Act and taking administrative measures in accordance with Section 48 of the German Securities Trading Act to intervene in the financial supervisory sphere in order to restore proper functioning and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"The legal basis for this is the impending threat to the proper functioning of financial supervision in Germany posed by the fact that a financial services provider appears to be operating in breach of the legal framework and is continuing to offer financial services in Germany.

"The financial supervisory authority, in accordance with the legal mandate to supervise the legal and compliant operation of financial services, is reacting to a threat to the proper functioning of the financial supervisory sphere in Germany arising in connection with the new EU legal framework for crypto services (the ‘Markets in Crypto-Assets Regulation’ or ‘MiCA’), to intervene in order to restore proper functioning and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"In this specific case, BaFin is assuming financial supervisory powers in accordance with Section 15 of the German Banking Act and taking administrative measures in accordance with Section 48 of the German Securities Trading Act to intervene in the financial supervisory sphere in order to restore proper functioning and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"The legal basis for this is the impending threat to the proper functioning of financial supervision in Germany posed by the fact that a financial services provider appears to be operating in breach of the legal framework and is continuing to offer financial services in Germany.

"The financial supervisory authority, in accordance with the legal mandate to supervise the legal and compliant operation of financial services, is reacting to a threat to the proper functioning of the financial supervisory sphere in Germany arising in connection with the new EU legal framework for crypto services (the ‘Markets in Crypto-Assets Regulation’ or ‘MiCA’), to intervene in order to freeze the offering of financial services and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"In this specific case, BaFin is assuming financial supervisory powers in accordance with Section 15 of the German Banking Act and taking administrative measures in accordance with Section 48 of the German Securities Trading Act to intervene in the financial supervisory sphere in order to freeze the offering of financial services and to act in accordance with the constitutional mandate to intervene in the event of a threat to the legal order.

"The legal basis for this is the impending threat to the proper functioning of financial supervision in Germany posed by the fact that a financial services provider appears to be operating in breach of the legal framework and is continuing to offer financial services in Germany.

"The financial supervisory authority