German Regulator Identifies 'Deficiencies' in Ethena's USDe, Orders Immediate Issuance Halt

The German financial supervisory authority BaFin said it identified "serious deficiencies" in Ethena's USDe token, which the company calls a synthetic dollar, and forbade the issuer from offering it to the public with immediate effect.
The European Union's Market in Crypto Assets (MiCA) regulations for issuers of stablecoins, tokens whose value is tied to another asset, took effect on June 30 last year. Ethena GmbH has been issuing USDe since June 28, according to BaFin. Companies were allowed to continue issuing their tokens while applying for a MiCA license, unless ordered to stop.
"During the ongoing licensing process, BaFin has identified, among other things, serious deficiencies in the bank's business organization and violations of MiCAR requirements, such as those regarding asset reserves and compliance with capital requirements," the regulator said.
USDe counts as an asset-referenced token because it is "a crypto asset whose value stability is to be maintained by reference to other assets, rights, or currencies," BaFin said.
Ethena is the yield-generating protocol that markets the $5.4 billion token as a "synthetic dollar" with its price anchored at $1. The token uses cryptocurrencies including bitcoin (BTC) and ether (ETH) as backing assets, pairing them with an equal value of short perpetual futures positions on various exchanges.
The strategy generates income for the protocol when perpetual funding rates are positive and passes on some of the income as yield to those who stake USDe (sUSDe). The protocol also issues the USDtb stablecoin, backed by BlackRock's tokenized Treasury bill fund.
"BaFin also has reasonable grounds to suspect that Ethena GmbH is publicly offering securities in Germany in the form of 'sUSDe' tokens of Ethena OpCo. Ltd. without the required securities prospectus," the regulator said.
Ethena said on X that it will "continue to evaluate alternative frameworks," after being notified that the "application under the MiCAR regulatory framework will not be approved."
Ethena's governance token, ENA, had dropped 6.5% in the past 24 hours, extending losses following the announcement, according to CoinMarketCap data.
Krisztian Sandor contributed to this article.
UPDATE (March 21, 16:37 UTC): Adds MiCA in second paragraph, regulator quote in third, USDe explanation starting in fifth.