BaFin Suspends Public Sales of USDe Token Issued by Ethena GmbH

The German financial regulatory authority, BaFin, has ordered the suspension of all public sales of the USDe token issued by Ethena GmbH.

The German financial regulatory authority, BaFin, has ordered a suspension of all public sales of the USDe token issued by Ethena GmbH.

According to a statement by BaFin on Friday, the decision to halt the token sales follows concerns that the token violates European Union regulations and could be deemed an unregistered security.

Located in Frankfurt, Ethena GmbH has been developing a stablecoin that is pegged to the US dollar. The regulator began examining the token after it was launched in June 2024.

During the course of the investigation, BaFin has accused Ethena GmbH of significant compliance failures, ultimately leading to the ban on the primary offering of the token.

BaFin Halts USDe Token Sales by Ethena GmbH

In its order, BaFin has instructed Ethena GmbH to cease selling the USDe token to the public. The German regulator has also imposed restrictions on the company’s use of the reserves to support the token and has closed the online platform that the firm was using.

Moreover, Echina GmbH will not be able to accept any new customers, as BaFin has prohibited it from doing so. These measures are designed to slow down the development of events relative to the legal rules set by MiCAR.

Consequently, in its announcement, BaFin has expressed concerns regarding the matter in which Ethena GmbH offered securities without prior registration in Germany.

According to BaFin, the company is selling securities without a prospectus, a violation of German Securities Law. The regulator also mentioned the USDe token, which is a synthetic dollar and is linked to another token, sUSDe. This interconnection could deepen the regulation issue even more.

Investigation of Token Issuance Process

As part of its statement, BaFin noted that Ethena GmbH failed to follow some of the standard procedures in its approval process for issuing the USDe tokens.

The first question that arises 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 falls under its oversight responsibilities assigned by MiCAR, which is focused on bringing stability and transparency to the crypto market.

Ethena GmbH had applied for regulatory approval of the USDe token under MiCAR. However, BaFin previously raised concerns about the company’s business organization and its ability to meet the standards set by the regulation.

The regulator also pointed out that some of the tokens were issued before MiCAR came into effect, which could further complicate the approval process.

As part of the regulatory measures, BaFin has moved to freeze the reserve assets of Ethena GmbH, which are used to support 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.

To oversee the situation and ensure compliance with the regulator’s directives, BaFin has appointed a special representative.

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.