Germany’s BaFin regulator bans Ethena from offering USDe in the country

Germany’s financial regulator BaFin has found significant flaws in the issuance of Ethena’s USDe and has restricted the distribution of the stablecoin in the country. USDe is a synthetic stablecoin, which may pose significant risk of instability. 

Germany’s financial regulator BaFin has cited serious flaws in the issuance process of Ethena’s stablecoin USDe. As a result, BaFin has moved in to restrict the offering of USDe to German traders and investors.  Ethena announced it would research additional frameworks to seek regulatory approval for USDe. 

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 MiCAR…

— Ethena (@ethena) March 21, 2025

BaFin also proposed to have the asset frozen in the accounts of all custodians offering USDe. Ethena has previously received criticism for the stability of its synthetic stablecoin, but has managed to retain the $1 peg due to favourable market conditions. 

The limitation and freezing of USDe affects only the Ethena GMBH site. German traders that hold USDe in self-custodied wallets can still swap the token on the open market or through decentralized exchanges. BaFin will appoint a representative to oversee the unwinding of Ethena’s activity on the German market. 

BaFin also believes Ethena GMBH has been offering unregistered securities through the yield-bearing sUSDe stablecoin. The company has not submitted the required prospectus, in which the exact conditions of sUSDe returns are outlined. 

Ethena will still be able to mint USDe through other entities, and no user wallets or assets have been frozen or blacklisted. The current BaFin measures are not yet final, and may have an interim period until full application.

Ethena will still seek regulatory approval for USDe

Based in Frankfurt, Ethena GMBH serves as a testing ground for regional laws. Prior to the deadline of June 30, 2024, when MiCA regulations went into effect, the German company offered USDe. As a result, Ethena was able to explore ways to distribute USDe to German traders while also enjoying months of lax regulations.

Ethena has set up several business entities around the world to mint and redeem USDe. The German organization’s duties included gaining access to one of the biggest cryptocurrency markets and securing authorization for operations based in the EU. 

‘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,’ explained the regulator in its statement.

As of July 29, 2024, Ethena has submitted an application for MiCA authorization within the allotted time. The token is not on the list of stablecoins that are permitted in the Euro Area, though, as the German financial authority simply rejected its request. 

Ethena GMBH started issuing USDe tokens in Germany since June 28, 2024, just days before the MiCA cut-off date. As of March 21, Ethena carries over $5.4B tokens in circulation, with most offered outside of Germany. Some of the tokens were issued before any MiCA deadlines. 

Not all USDe have been issued by the German branch of the company. Since January 1, 2025, Ethena issues its stablecoin through Ethena BVI Limited, based on the British Virgin Islands. 

After the news, USDe kept within its usual range, with a minor de-peg to $0.99, which is not unusual for synthetic stablecoins. ENA, the protocol’s native token, erased 6.9% of its value, sinking to $0.36, near the lower range for the past three months.