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Germany’s financial supervisory authority (BaFin) has taken its first enforcement action under the EU’s Markets in Crypto-Assets Regulation (MiCA).
The regulator has ordered Ethena to halt the issuance of its USD asset-referenced token (ART).
According to its website, Ethena is “a synthetic dollar protocol built on Ethereum that provides a crypto-native solution for money”.
Its backers include key crypto players such as Binance and ByBit, as well as more traditional firms, such as Franklin Templeton. It has offices in Lisbon, Portugal as well as Brooklyn, in the US.
Under MiCA, an ART is a type of crypto-asset that aims to maintain a stable value by referencing other assets, rights, or a combination thereof, excluding electronic money tokens.
BaFin said that it identified serious deficiencies in Ethena’s business organisation and breaches of MiCA, including failure to meet capital requirements.
In response, it has frozen Ethena’s ART asset reserve, banned the issuance of new USDe tokens and appointed a special representative to oversee compliance.
BaFin also suspects Ethena of offering securities in Germany without the required prospectus — specifically its sUSDe token, which provides investors with returns linked to USDe holdings.
Further supervisory measures, including a potential ban on these securities, are under consideration.
Ethena had been operating under MiCA’s transitional arrangements, which allow issuers to continue offering ARTs while awaiting full authorisation. However, BaFin’s findings led to immediate action, restricting the firm’s operations.
Although existing USDe token holders cannot currently redeem their tokens with Ethena, secondary market trading remains unaffected.
BaFin has said that it is coordinating with the European Central Bank (ECB), the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) on the matter.
Ethena’s response
In a post on X, Ethena played down the actions taken by BaFin.
“Since its inception, Ethena has been exploring various options and jurisdictions when it comes to regulatory frameworks globally that would be conducive to our business, and as a result we have multiple entities within our structure facilitating minting and redemption.”
The company said that gaining a MiCA authorisation via Ethena was “one of various options we have been pursuing”.
Having received the news that its application has not been approved, the company said that although it is “disappointed by this decision, we will continue to evaluate alternative frameworks”.
Ethena has also said that the decision will in “no way disrupt any current listings of USDe, or minting and redemption via Ethena (BVI) Limited (which services the vast majority of our mint users) and USDe remains fully backed”.
“Contrary to reports, no assets have been 'frozen' and all remain available for redemption. We will be revising our Terms accordingly in the coming week.”
