BaFin Identifies Major Flaws In Ethena GmbH’s USDe Token Approval Process
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Germany’s financial regulator, BaFin, has found serious issues with Ethena GmbH’s approval process for its USDe token. As a result, BaFin has taken immediate actions, including banning the token’s public offering and freezing the company’s asset reserves held by depositary agencies.
BaFin suspects Ethena GmbH has been offering securities in Germany without the proper approval of a prospectus. More regulatory steps, such as a possible ban on these offerings, are under consideration.
BaFin Acts Against Ethena GmbH Over USDe Approval Issues
Ethena GmbH, based in Frankfurt am Main, issues the USDe token, which is considered an asset-referenced token under the Markets in Crypto-Assets Regulation (MiCA). The company uses various crypto assets and an algorithmic hedging strategy to keep it in line with the US dollar.
Under MiCA’s transitional rules, issuers of asset-referenced tokens are allowed to operate while waiting for regulatory approval. Ethena GmbH applied for approval but began issuing USDe in Germany before receiving it.
BaFin has identified significant flaws in Ethena GmbH’s approval process for the USDe token. Consequently, BaFin has ordered immediate measures to stop USDe token offerings and freeze asset reserves.
Currently, about 5.4 billion USDe tokens are in circulation, with a large portion issued outside Germany before MiCA’s rules came into effect. Moreover, Ethena BVI Limited, based in the British Virgin Islands, has been issuing the token for years.
BaFin’s investigation revealed issues in Ethena GmbH’s business structure, including failure to meet MiCA’s asset reserve and capital requirements. The regulator will release further information after the approval process is finalized.
Meanwhile, the USDe/USD daily chart shows a decline that started recently. It seems likely that the downward trend will continue.
BaFin Freezes Ethena GmbH’s Assets And Investigates sUSDe Token Offerings
BaFin has also imposed measures, such as freezing the company’s asset reserves, restricting executive access, and blocking new business activities, including the company’s website. Although these actions are not yet final, token holders cannot redeem USDe through Ethena GmbH, though secondary market trading is not affected.
Additionally, BaFin suspects that Ethena GmbH is offering “sUSDe” tokens, issued by Ethena OpCo. Ltd, without the required prospectus. These sUSDe tokens are exchanged for USDe tokens and provide returns to their holders.
BaFin has stopped Ethena GmbH from selling its USDe token because of problems in its approval process. It has frozen the company’s money and blocked some activities. More checks are happening. USDe holders are unable to redeem their tokens through Ethena GmbH, but secondary market trading remains available.
