- BaFin orders halt to USDe sales, citing unregistered securities.
- Ethena’s MiCA application was denied due to business compliance issues.
- ENA token drops 6.5% as regulator freezes reserve assets.
The German financial regulator BaFin has halted the sale of Ethena GmbH’s USDe token because of critical noncompliance issues. BaFin took action because Ethena GmbH violated MiCA regulations from the European Union and distributed unregistered securities. BaFin ordered Ethena GmbH to freeze the assets that backs the token and deactivate its website portal.
BaFin Halts Ethena’s Operation For Compliance Failure
BaFin’s order prevents Ethena GmbH from bringing new clients onboard in as well as prohibits sales activities. BaFin believes Ethena GmbH distributes sUSDe tokens without the relevant prospectus documentation. Although BaFin’s directive prohibits initial token launches and new token issuance, secondary market activities remain unaffected and redemptions are temporarily restricted.
Ethena GmbH had filed its application for MiCA approval with BaFin on July 29, 2024. However, BaFin denied this request because the company had critical operational flaws in its business activities. Moreover, BaFin stated that Ethena GmbH failed to comply with MiCA requirements for asset reserves and capital requirements.
BaFin’s action comes after a deep investigation of USDe token operations and structure. The regulator discovered that the token’s connection to sUSDe tokens may represent distribution of unregistered securities under German law. Moreover, BaFin appointed an official representative to oversee the situation and ensure compliance with the law.
Ethena’s Response to BaFin’s Ban
Ethena GmbH announced it would seek other regulatory structures in response to the regulator’s measures. The company emphasized that no assets were frozen because the USDe tokens are fully backed by assets. Moreover,Ethena announced that the disruption would not impact the current listings or the minting through its subsidiary Ethena (BVI) Limited.
Ethena, a yield-generating protocol, experienced a substantial decrease in ENA token value after BaFin made its announcement. ENA token decreased by 6.5% in the last 24 hours which reflects the market’s reaction. Nonetheless, Ethena announced plans to explore alternative jurisdictions and regulatory solutions.
The firm claims all of its business operations outside Germany proceed without disruption. Ethena stated that users can still access and redeem USDe through its BVI-based platform. The firm’s spokesperson confirmed the company would revise its policies based on BaFin’s decision.
Ethena will issue additional updates about the situation and pursue other regulatory frameworks. The company continues to resolve the issue despite operational hurdles in Germany because of the ban. Market participants should monitor the development of legal and regulatory challenges.