Ethena Labs Shuts German Entity After BaFin Enforcement

Ethena Labs, the issuer of the synthetic stablecoin USDe, has announced its decision to shut down its German entity, Ethena GmbH, and withdraw its application for regulatory approval under the European Union’s Markets in Crypto-Assets Regulation (MiCAR). This move comes after Germany’s financial regulator, BaFin, took enforcement action against the firm, ordering it to halt public sales of USDe due to noncompliance with MiCAR.

In a statement posted on X, Ethena Labs confirmed the agreement with BaFin to wind down all activities of Ethena GmbH and to no longer pursue MiCAR authorization in Germany. The company has already transitioned all whitelisted users previously onboarded through its German entity to its affiliated British Virgin Islands-based company, Ethena (BVI) Limited. Ethena GmbH has not conducted any minting or redemption of USDe since March 21, 2025, and the firm’s operations have continued without disruption under its BVI entity.

The BVI entity has been issuing its USDe token, currently totaling around 5.4 billion tokens. Ethena GmbH no longer has any whitelisted users or direct customers, with most USDe in circulation issued outside of Germany and prior to MiCAR enforcement. BaFin’s rejection of Ethena GmbH’s MiCAR application, made public on March 25, cited “significant deficiencies” in the firm’s organizational structure and failure to meet regulatory standards on asset reserves and capital adequacy.

BaFin also raised concerns that the sUSDe token, Ethena’s yield-bearing variant of USDe, could qualify as a security under German law, which would require a registered prospectus for public offerings. This prompted a series of supervisory actions, including a halt to USDe public offerings within Germany and an order for custodians to freeze reserve assets. While BaFin clarified that secondary market trading of USDe is unaffected, redemptions through the German subsidiary are restricted.

Ethena had originally applied for authorization on July 29, 2024, which allowed it to continue issuing USDe under MiCAR’s transitional rules until a final decision was reached. Most of the 5.4 billion USDe in circulation had already been issued before MiCAR’s enforcement or outside Germany. BaFin’s notice also indicated a “sufficiently substantiated suspicion” that sUSDe qualifies as a security under German law, due to its yield-bearing structure and the potential for investor profit.

BaFin is now assessing whether public offerings of such hybrid tokens require full compliance with securities law, including approved prospectuses and disclosures. This regulatory shift in Europe, where MiCAR is reshaping crypto firms’ operations, mandates strict requirements for stablecoin issuers, including full reserve banking, transparency, and regulatory approval. Stablecoins are classified into asset-referenced tokens and e-money tokens, each subject to different rules.

Some exchanges, like Kraken and Crypto.com, have already delisted Tether’s USDT in response. Binance followed suit on March 3, removing several non-compliant stablecoins across the European Economic Area, including DAI, FDUSD, and PAXG. Meanwhile, licensed exchanges are using MiCAR’s “passporting” system, which allows them to operate across all 30 EEA countries under a single regulatory umbrella.

This withdrawal by Ethena Labs highlights the challenges faced by crypto firms in navigating different regulations, pushing them to adopt flexible, multi-jurisdictional strategies for survival and growth. As regulatory barriers rise, innovators may increasingly favor offshore or less restrictive markets. The crackdown on USDe suggests that synthetic stablecoins lacking traditional asset backing may face more scrutiny and less adoption in tightly regulated regions. Regulatory exits can lower user confidence, making transparency and proactive compliance important for stablecoin issuers seeking long-term credibility.