BaFin and Ethena GmbH Agree on USDe Redemption Plan

The German Federal Financial Supervisory Authority, BaFin, has concluded its case against Ethena GmbH, the German subsidiary of Ethena Labs, regarding the issuance of the USDe stablecoin. The regulator and Ethena GmbH have agreed on a redemption plan that will allow USDe stablecoin holders to declare redemption claims directly against Ethena GmbH until August 6. This process will be overseen by a special representative appointed by BaFin. Following the deadline, Ethena GmbH will be officially wound up within Germany, the European Union, and the European Economic Area (EEA). Any claims made after August 7 will need to be directed to Ethena (BVI) Ltd., the company’s offshore affiliate.

The resolution of this case marks the end of a four-month conflict between Ethena and BaFin. The dispute began on March 21 when BaFin barred Ethena GmbH from publicly offering its USDe stablecoin, citing violations of the EU’s Markets in Crypto-Assets Regulation (MiCA). The regulator accused the company of selling unregistered securities through its yield-bearing sUSDe tokens, which are linked to the USDe stablecoin. As a result, BaFin enforced sanctions, including freezing USDe reserve assets, closing the company’s website and portal, and ordering the company to stop offering services to new users.

In response to these actions, Ethena Labs ceased all operations of its German subsidiary on April 15. The company stated that it would no longer pursue its MiCA authorization in Germany and that its German subsidiary had not conducted any minting or redemption activities for USDe since March 21. Ethena GmbH had applied for the MiCA authorization on July 29, 2024, but BaFin rejected the application in March due to compliance failures. Despite the regulatory actions, nearly 5.6 billion tokens remain in circulation, most of which were issued before the MiCA framework took effect and are located around the globe.

The agreement on the redemption plan indicates that Ethena GmbH will have no outstanding issues related to its USDe-related operations once the plan is fully implemented. However, the company has not indicated whether it plans to re-enter the EU and EEA markets in the future. This development underscores the importance of regulatory compliance in the cryptocurrency industry and the potential consequences of non-compliance with regulatory frameworks. The case highlights the stringent measures that regulators are taking to ensure that cryptocurrency companies adhere to the established guidelines, particularly in the context of stablecoin issuance and the sale of unregistered securities. The resolution also serves as a reminder to other companies in the industry about the necessity of complying with regulatory requirements to avoid similar legal and operational challenges.