BaFin Rejects Ethena Labs' Application to Issue Asset-Referenced Tokens

The regulator also raised concerns that the sUSDe may constitute an unlicensed security offering.

Germany’s financial regulator, BaFin, has rejected Ethena Labs’ application to issue asset-referenced tokens under the European Union’s Markets in Crypto-Assets Regulation (MiCAR).

The regulator also expressed concerns that the sUSDe may constitute an unlicensed security offering.

According to BaFin’s official notice, the application submitted by Ethena GmbH, a Frankfurt-based entity in Ethena Labs’ corporate structure, exhibited “significant deficiencies” in organizational practices and failed to meet MiCAR requirements concerning asset reserves and capital adequacy.

BaFin immediately imposed enforceable supervisory measures, including prohibiting further public offerings of the USDe token within Germany, and ordered custodians to freeze the token’s reserve assets.

Notably, some stablecoin issuers have been facing difficulties performing coin operations in accordance with the new MiCAR regulation. Major European exchanges, such as Binance and FTX, decided to delist Tether USD (USDT) because they were concerned that the token might be non-compliant. However, authorities have not yet deemed USDT non-compliant.

Ordered to stop USDe issuance

However, Ethena GmbH continued issuing the token in Germany after applying for authorization on July 29, 2024, to operate as a crypto service provider under MiCAR's transitional provision.

Approximately 5.4 billion USDe tokens are currently circulating, most of which were issued before MiCAR’s effective enforcement and outside of Germany.

BaFin clarified that its actions do not affect USDe’s secondary market trading but temporarily restrict redemptions directly through Ethena GmbH. Since January 2025, Ethena BVI Limited, an affiliated entity based in the British Virgin Islands, has also facilitated the token’s issuance.

Moreover, the regulator appointed a special representative to monitor compliance and noted the potential for additional actions, including a ban on public offerings of associated securities.

Securities offering

Beyond operational shortcomings, BaFin expressed a “sufficiently substantiated suspicion” that the sUSDe token, a yield-bearing stablecoin variant, qualifies as a security under German law and has been offered publicly without an approved securities prospectus.

The sUSDe is a yield-bearing stablecoin that can be acquired by staking USDe. BaFin’s concern stems from the financial structure and alleged profit promise embedded in the sUSDe token, which may trigger regulatory classification as a security.

This suspicion arose from the structure of the sUSDe as a yield-bearing instrument, which could fall afoul of German securities law if the token was marketed with promises of financial return to investors.

BaFin’s position introduces a regulatory challenge to hybrid instruments like sUSDe, which combine stablecoin mechanics with yield-generation features. The regulator is actively evaluating whether the public distribution of such instruments requires compliance with securities law, including disclosure and prospectus obligations.

The outcome of this classification could set a precedent for similar crypto assets in the European Union.

Ethena Labs’ response

In response, Ethena Labs published a statement confirming that it had been informed by email of BaFin’s decision to reject Ethena GmbH’s MiCAR application.

The company acknowledged the decision in a public statement and said it is “evaluating alternative frameworks” for regulatory compliance.

Ethena added:

“Since its inception, Ethena has been exploring various options and jurisdictions when it comes to regulatory frameworks globally. A MiCAR authorization via Ethena GmbH was one of various options we have been pursuing.”

The firm emphasized that the decision does not impact USDe minting and redemption activities facilitated by Ethena BVI Limited, which services the “vast majority” of users.

The company also denied speculation of an asset freeze, asserting that all reserves remain available. It added that it plans to revise its terms of service in the coming week.

BaFin’s rejection and planned action highlight the increasing scrutiny of stablecoins and synthetic yield instruments operating within or targeting European markets following the implementation of MiCA.