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Germany’s financial watchdog, BaFin, has ordered Ethena GmbH to stop selling its USDe token to the public. The regulator claimed the digital asset may violate European Union (EU) laws and could be classified as unregistered securities.
The agency has stopped Ethena GmbH’s financial operations as it raises serious concerns about its compliance with regulations. This move is part of a broader effort to enforce the EU’s Markets in Crypto-Assets Regulation (MiCAR) and increase oversight in the crypto industry.
The BaFin Case Against Ethena
BaFin has accused the Frankfurt-based company of issuing USDe tokens without proper approval. According to German financial laws, companies must file a prospectus before selling securities. However, BaFin believes Ethena GmbH refuses to comply, making the token’s distribution illegal.
The regulatory agency also highlighted USDe’s connection to sUSDe, another asset in Ethena GmbH’s ecosystem, as another issue. Authorities worry this link could cause more legal problems, especially with transparency and investor protection.
The agency revealed that some USDe tokens were issued before MiCAR rules took effect, which could make the legal situation even more complicated. Adding to its woes, BaFin has questioned Ethena GmbH’s overall business setup.
The financial watchdog claimed the company’s financial reserve is insufficient to support its token and does not meet MiCAR’s capital requirements. This comes as the trading platform seeks approval under MiCAR.
Regulator Freezes Ethena GmbH’s Reserve Assets
BaFin has taken strong action against Ethena GmbH as part of its enforcement measures. The company can no longer sell its USDe token to the public, and its online platform has been shut down.
BaFin has also frozen Ethena GmbH’s financial reserves. This move could affect customers who want to redeem their tokens, as the company’s redemption platform is now blocked.
However, the ban only applies to new sales and redemptions, so existing holders can still trade their tokens on the secondary market.
BaFin and EU Authorities Take Further Action
BaFin has assigned a special representative to oversee the situation and ensure the company follows the new restrictions. The regulator also works with the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA).
These entities are charged with resolving any further issues surrounding the USDe token. BaFin has promised to update the public as the licensing process continues.
For now, Ethena GmbH must comply with these strict measures, or it may face even tougher penalties. The case highlights the growing pressure on crypto companies to follow financial rules as regulators crack down on unregistered digital assets.
