Germany’s Federal Financial Supervisory Authority (BaFin) has recently made headlines by rejecting Ethena Labs’ application to issue asset-referenced tokens under the European Union’s Markets in Crypto-Assets Regulation (MiCAR). This decision comes after BaFin raised concerns about the sUSDe token potentially constituting an unlicensed security offering.
In an official notice, BaFin cited significant deficiencies in Ethena GmbH’s application, a Frankfurt-based entity under Ethena Labs’ corporate structure. The application failed to meet MiCAR requirements related to asset reserves and capital adequacy, leading to BaFin imposing enforceable supervisory measures. These measures include prohibiting further public offerings of the USDe token within Germany and ordering custodians to freeze the token’s reserve assets.
While some stablecoin issuers have faced challenges under MiCA regulation, Ethena GmbH continued issuing the USDe token in Germany after applying for authorization in July 2024. Approximately 5.4 billion USDe tokens are currently in circulation, with most issued before MiCAR’s enforcement and outside of Germany. BaFin’s actions do not impact USDe’s secondary market trading but temporarily restrict redemptions directly through Ethena GmbH.
BaFin also expressed concerns about the sUSDe token potentially qualifying as a security under German law. The yield-bearing stablecoin acquired by staking USDe raised regulatory flags due to its financial structure and profit promise, leading BaFin to suspect it has been offered publicly without an approved securities prospectus. This regulatory challenge may set a precedent for similar crypto assets in the European Union.
In response to BaFin’s decision, Ethena Labs issued a statement confirming the rejection of Ethena GmbH’s MiCAR application. The company is now exploring alternative frameworks for regulatory compliance and reassured users that all reserves remain available. Ethena BVI Limited, an affiliated entity in the British Virgin Islands, continues to facilitate USDe minting and redemption activities for the majority of users.
As BaFin’s rejection underscores increased scrutiny of stablecoins and synthetic yield instruments in European markets under MiCA, Ethena Labs plans to revise its terms of service in the coming week. The evolving regulatory landscape for digital assets highlights the need for compliance and transparency in the rapidly growing cryptocurrency industry.