The German financial regulatory authority, BaFin, has recently made a bold move by prohibiting all public sales of Ethena GmbH’s USDe token. This synthetic dollar has been deemed to violate the European Union’s MiCAR regulations, and the firm has been accused of selling unregistered securities in the region.

According to BaFin’s announcement, the firm has been ordered to freeze the reserve assets that back the token, shut down their website portal, and stop taking on new customers. In addition, the regulator has appointed a representative to monitor the situation with Ethena GmbH.

BaFin has stated that they have reasonable grounds to suspect that Ethena GmbH is selling securities in the form of sUSDe tokens without the required prospectus. These tokens are interconnected, and investors can exchange USDe tokens for sUSDe tokens. However, the ban only applies to primary sales and issuance of the token, and secondary sales will not be affected.

Despite the ban, Ethena GmbH has filed for regulatory approval under MiCA in 2024, hoping to be “grandfathered” into the existing framework. However, their application was denied by BaFin due to serious deficiencies in their business organization and a lack of compliance with the MiCA framework.

It is worth noting that there are currently around 5.4 billion Ethena tokens in circulation, but many of these were minted outside of the German jurisdiction and before MiCA took effect.

This is a developing story, and more information will be added as it becomes available. In the meantime, the regulator has temporarily blocked redemption via the Ethena GmbH exchange, but secondary sales of the token will still be allowed.

It is clear that BaFin is taking a strong stance against unregistered securities and is closely monitoring the situation with Ethena GmbH. This serves as a reminder to all companies operating in the financial sector to ensure compliance with regulations to avoid facing similar consequences.

We will continue to follow this story and provide updates as they become available. Stay tuned for more information on this developing situation.