Germany’s financial regulator, BaFin, identified significant deficiencies in Ethena GmbH’s approval process for its USDe token. As a result, BaFin implemented immediate measures to prohibit the company from offering the token and ordered a freeze on its assets held by depositary institutions.

BaFin believes Ethena GmbH sold securities in Germany without getting the right approval first. More rules might be added, including a full ban on these sales.

BaFin Imposes Measures On Ethena GmbH Over USDe Token Approval Issues

Ethena GmbH, headquartered in Frankfurt am Main, issues the USDe token, classified as an asset-referenced token under MiCA regulations. The company utilizes various crypto assets and an algorithmic hedging mechanism to maintain the token’s stability relative to the US dollar.

MiCA lets token makers work while waiting for full approval. Ethena GmbH asked for approval but started selling the token in Germany before getting it.

Right now, about 5.4 billion USDe tokens exist, and many were made outside Germany before MiCA started. Another company, Ethena BVI Limited, based in the British Virgin Islands, also started making the token.

BaFin checked Ethena GmbH’s setup and found it did not follow the rules for keeping enough money in reserves. The regulator will share more news when the approval process is finished.

The financial regulator also stopped the company from using its money, blocked company leaders from getting to it, and shut down new business, including its website. While these measures are not yet final, token holders currently cannot redeem their USDe tokens through Ethena GmbH. However, secondary market trading remains unaffected.

The regulator also believes Ethena GmbH is selling “sUSDe” tokens without the right approval. These tokens, given in exchange for USDe, give earnings to holders.

BaFin’s Oversight Of Ethena GmbH Signals Strengthened Crypto Regulations

BaFin is Germany’s top financial regulator, watching over banks, financial companies, and insurance businesses. It works under the country’s Finance Ministry and has offices in Bonn and Frankfurt.

Banking supervision in Germany began after a major financial crisis. Before this, only public savings banks were monitored. A decree created the office of Reichskommissar für das Bankgewerbe, and the Chancellor chose Friedrich Ernst for the role.

Later, new banking rules changed this office into the Aufsichtsamt für das Kreditwesen. At first, the Reichsbank helped with supervision through a special office. Later, this responsibility moved to the Economics Minister. Eventually, the Aufsichtsamt für das Kreditwesen was closed, and the Economics Ministry took over its duties.