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BaFin, the German financial regulatory authority, has prohibited all public sales of Ethena GmbH’s USDe — a synthetic dollar — claiming that the token violates the European Union’s MiCAR regulations and accused the firm of selling unregistered securities in the region.
According to the announcement from the regulator, BaFin has ordered the firm to freeze the reserve assets that back the token, close down the website portal, and has ordered the firm to stop taking new customers. In a translated statement, the regulator wrote:
“The USDe and sUSDe tokens are interconnected in such a way that investors can receive a sUSDe token in exchange for a USDe token,” the regulator continued.
Despite the ban on primary sales and issuance of the token, the regulator said that secondary sales of the token will not be prohibited or affected. However, redemption via the Ethena GmbH exchange has been temporarily blocked by the regulator.
Ethena GmbH files for MiCA approval
Ethena GmbH submitted a request for regulatory approval under MiCA on July 29, 2024, and the firm expected to be "grandfathered" into the existing regulatory framework.
However, BaFin denied the application, citing "serious deficiencies in the business organization" and a lack of compliance with the MiCA framework.
BaFin acknowledged that there are currently around 5.4 billion Ethena tokens in circulation. However, many of these tokens were minted outside of the German jurisdiction and before MiCA took effect.
This is a developing story, and further information will be added as it becomes available.
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