German Regulator Flags Issues in Ethena’s USDe, Orders Immediate Halt on Issuance

Ethena's ENA token has dropped 6.5% in the past 24 hours, following BaFin's order to halt the issuance of its USDe stablecoin due to identified deficiencies.

Key Takeaways:

• BaFin, Germany’s financial regulator, cited deficiencies in Ethena’s business organization and violations of MiCA (Markets in Crypto-Assets) requirements as reasons for the issuance halt.
• Ethena stated that it will explore alternative regulatory frameworks to comply with regulations.
• ENA, the governance token of the protocol, has fallen 6.5% in the past 24 hours following the regulatory action.

Germany’s financial regulator, BaFin, has identified "serious deficiencies" in Ethena’s USDe token, which the company refers to as a synthetic dollar, and has immediately prohibited its issuance to the public.

The European Union’s Markets in Crypto-Assets (MiCA) regulations, which govern stablecoin issuers, came into effect on June 30 last year. According to BaFin, Ethena GmbH began issuing USDe on June 28, just two days before the regulations took effect.

Under MiCA, companies could continue issuing tokens while applying for a license, unless specifically ordered to halt operations, as in Ethena’s case.

BaFin stated that during the ongoing licensing process, it found serious deficiencies in Ethena’s business organization, along with violations of MiCA regulations. These violations include issues with asset reserves and non-compliance with capital requirements, prompting the regulator to order an immediate halt to USDe issuance.

BaFin classifies USDe as an asset-referenced token, defining it as a crypto asset designed to maintain value stability by being tied to other assets, rights, or currencies.

Ethena, a yield-generating protocol, promotes USDe—a $5.4 billion token—as a "synthetic dollar" pegged to $1. The token is backed by cryptocurrencies like Bitcoin (BTC) and Ether (ETH), paired with equal-value short perpetual futures positions across multiple exchanges.

This strategy allows the protocol to generate income when perpetual funding rates are positive, passing a portion of the profits as yield to USDe stakers (sUSDe). Additionally, Ethena issues USDtb, a stablecoin backed by BlackRock’s tokenized Treasury bill fund.

BaFin also suspects that Ethena GmbH has been offering securities in Germany without proper authorization, specifically through sUSDe tokens issued by Ethena OpCo. Ltd., due to the lack of a required securities prospectus.

Following the regulator’s decision, Ethena stated on X that it will explore alternative regulatory frameworks, after being informed that its MiCA application will not be approved.

Meanwhile, Ethena’s governance token, ENA, has dropped 6.5% in the past 24 hours, extending its losses in response to the announcement, according to CoinMarketCap.