The reason was serious compliance violations and possible violations of securities laws. USDe is a synthetic dollar created by Ethena. Unlike traditional stablecoins, which are typically backed by fiat money or other assets, USDe is an innovative financial instrument that combines bitcoin and derivatives positions to maintain a stable price of $1. This approach circumvents some of the limitations of classic stablecoins, but also creates new regulatory challenges. According to an official statement , BaFin ordered to freeze the reserve assets backing the token, shut down the company's web portal and stop accepting new customers. The regulator also appointed a representative to monitor the current situation with Ethena GmbH. In a translated statement, the regulator said, ”BaFin has reasonable grounds to suspect that Ethena GmbH in Germany is selling securities in the form of sUSDe tokens from Ethena OpCo. Ltd. without the required prospectus.” ”USDe and sUSDe tokens are interlinked such that investors can obtain an sUSDe token in exchange for a USDe token,” BaFin continued. Despite the ban on primary sales and issuance of the token, the regulator said secondary sales will not be banned or affected. In a statement on social media X, Ethena Labs noted that the USDe collateral remains intact and the token can still be redeemed through Ethena BVI Limited, despite the recent announcement by the German financial regulator. Ethena GmbH submits request for approval under MiCA Ethena GmbH filed a request for approval under the European MiCa regulation on July 29, 2024. The company hoped to be ”automatically included” in the existing regulatory framework. However, BaFin rejected the application on March 21, citing ”serious deficiencies in business organization” and non-compliance with MiCA requirements. BaFin acknowledged that there are about 5.4 billion Ethena tokens currently in circulation. However, many of these tokens were issued outside of German jurisdiction and before MiCA came into force. Ethena is attracting investment for its products Despite the risks associated with synthetic dollars, Ethena continues to attract institutional investment for its products. In February 2024, Ethena raised more than $100 million from investors to launch a new token called iUSDe, targeting institutional investors. The company also has entered a partnership with World Liberty Financial, a decentralized finance (DeFi) protocol launched by U.S. President Donald Trump in December 2024. As part of the agreement, World Liberty Financial purchased 500 000 ENA tokens - Ethena's management tokens. On February 26, cryptocurrency exchange MEXC announced a $20 million investment in USDe from Ethena to promote the use of stablecoins.
