- German regulator BaFin orders Ethena to cease operations in Germany under Europe‘s MiCA regulations, marking the first enforcement of these rules.
- Despite regulatory issues, Ethena’s combined stablecoin value has grown, with USDe dropping while their new USDtb token expands.
- Ethena has shifted operations to the British Virgin Islands after BaFin cited serious shortcomings in business organization and reserve requirements.
BaFin, Germany’s financial regulator, has ordered stablecoin issuer Ethena to shut down its German operations and redeem all tokens, marking the first enforcement action under Europe’s MiCA cryptocurrency regulations. The regulator previously prevented Ethena’s managing directors from accessing reserves, a significant regulatory intervention. Despite these measures, Ethena appears unfazed and has reportedly relocated its remaining activities to the British Virgin Islands.
Major asset managers Fidelity and Franklin Templeton are among Ethena’s financial backers. BaFin’s actions specifically targeted USDe, an asset-referenced token designed to maintain stable value using ETH derivatives. While USDe’s market capitalization has declined from $5.8 billion to $4.9 billion since February, Ethena’s newer fiat-backed stablecoin USDtb has grown from $90 million to $1.4 billion during the same period, resulting in overall expansion.
Regulatory Concerns
Before ordering the shutdown, BaFin identified “serious shortcomings in the company’s business organisation as well as violations of the requirements under MiCAR.” These violations included inadequate reserves and insufficient capital to meet regulatory requirements. Initially, USDe tokens were exclusively issued through Ethena GmbH, but since early 2025, they have also been issued via Ethena BVI. As of yesterday, all issuance is now conducted through the BVI entity, according to an announcement on X.
In March, BaFin took preliminary action by forcing Ethena’s German arm to freeze assets, stop issuing new tokens, and appoint a special representative to oversee compliance. The regulator also expressed concerns that Ethena’s staking option, sUSDe, might be an unlicensed security. BaFin explicitly stated that holders “can temporarily no longer redeem them with Ethena GmbH.”
Market Response
Despite the seemingly serious regulatory issues, cryptocurrency markets have shown little reaction to BaFin’s enforcement actions. This calm response comes even as Ethena prepares to launch its own blockchain. The company attempted to frame the German withdrawal as an “agreement” with BaFin, contradicting the regulator’s formal announcement that clearly described it as an order.
After failing to comply with initial restrictions, Ethena GmbH faced a €600,000 coercive fine and additional limitations on payments and sales. This ultimately led the company to withdraw its MiCAR application, necessitating its exit from the European Union.
Investors appear to be seeking clarity on whether these regulatory issues represent minor compliance matters or more substantial problems for a company that has otherwise maintained a respected position in the cryptocurrency sector.
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