Ethena’s USDe Stablecoin Sales Blocked by German Regulator Over ‘Serious Deficiencies’

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Regulatory Action Against Ethena GmbH

Ethena Labs’ USDe, the fourth-largest stablecoin by market capitalization, can no longer be offered for sale by the firm’s German subsidiary, Ethena GmbH, after BaFin, the German financial supervisory authority, identified “serious deficiencies” in the licensing approval process.

BaFin’s Actions

As a result of these deficiencies, BaFin placed multiple supervisory measures on Ethena GmbH to protect customers, including blocking the asset reserves, blocking its website, and appointing a special representative to monitor the measures.

The Regulatory Context

Ethena GmbH was able to offer its stablecoin by launching it just under the wire before the Markets in Crypto Assets regulation, or MiCA, took effect across the European Union.

Transitional Arrangement

According to BaFin’s release, Ethena GmbH took advantage of a transitional arrangement under the European MiCA regulation to enter the German market, citing that Ethena GmbH was able to issue the asset-referenced tokens only because it applied to do so one day prior to a July 30, 2024 deadline.

Ethena Labs’ Response

Ethena Labs said they are pursuing other options for MiCA certification.

Ethena’s Global Regulatory Strategy

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. A MiCA authorization via Ethena GmbH was one of various options we have been pursuing.

Impact on USDe Holders

While holders of USDe can no longer redeem them via Ethena GmbH, the measures placed on the Ethena Labs subsidiary do not affect USDe trading on secondary markets.

Stablecoin Remains Fully Backed

USDe remains fully backed, and to be clear, 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).

BaFin’s Suspicion

BaFin also indicated it has suspicion that Ethena GmbH is publicly offering securities in Germany without the required securities prospectus.

Ethena’s New Projects

Ethenea Labs and Securitize announced a new Ethereum Virtual Machine-compatible blockchain that will use stablecoins for gas fees.

ENA Token Performance

Ethena’s native token, ENA, is down more than 6% in the last 24 hours to $0.358, over 76% off its all-time high price.

Conclusion

The regulatory action against Ethena GmbH highlights the importance of complying with regulatory frameworks in the crypto space. While Ethena Labs is exploring alternative options for MiCA certification, the measures placed on Ethena GmbH may impact the stablecoin’s availability in the German market. However, the stablecoin remains fully backed, and its trading on secondary markets is unaffected.

FAQs

Q: What is the reason for the regulatory action against Ethena GmbH?
A: BaFin identified "serious deficiencies" in the licensing approval process.

Q: What measures did BaFin take against Ethena GmbH?
A: BaFin blocked the asset reserves, blocked the website, and appointed a special representative to monitor the measures.

Q: How will this impact USDe holders?
A: Holders of USDe can no longer redeem them via Ethena GmbH, but the measures do not affect USDe trading on secondary markets.

Q: What is Ethena Labs’ response to the regulatory action?
A: Ethena Labs is pursuing other options for MiCA certification and exploring various regulatory frameworks globally.