Germany’s financial watchdog BaFin has shown its regulatory teeth, forcing Ethena GmbH to pack its bags and cease operations after finding “serious deficiencies” in the company’s compliance with Europe’s new crypto playbook.
The swift action came less than a month after initial red flags were raised about the $4.9 billion USDe stablecoin, which maintains its dollar peg through a complex web of crypto assets and derivatives rather than traditional cash reserves.
The regulatory guillotine fell on March 21, 2025, when BaFin prohibited public sales of USDe in Germany. By April 15, Ethena Labs announced it would wind down its German entity entirely, abandoning plans to pursue MiCA authorization in the country.
The company’s retreat echoes a familiar dance—innovation stepping on regulatory toes, then shuffling away to friendlier shores.
USDe, the fourth-largest stablecoin globally, stands out as an odd duck in the stablecoin pond. While most competitors back their tokens with actual dollars sitting in banks, Ethena’s creation floats on a raft of ETH, Bitcoin, and other cryptocurrencies, balanced by derivatives that act as financial counterweights.
This synthetic approach, while innovative, crashed headlong into MiCA’s preference for tangible reserve backing and transparent asset segregation. BaFin specifically cited the sUSDe token as potentially qualifying as a security under German law, creating additional compliance hurdles.
German users haven’t been left stranded, however. They’ve been transferred to Ethena’s British Virgin Islands entity—trading European consumer protections for continued access to their digital dollars.
The irony is palpable: regulations designed to protect users have pushed operations offshore, beyond regulatory reach. Under FATF Travel Rule requirements, the move could complicate transaction reporting between jurisdictions.
The clash illuminates the broader struggle between financial innovation and oversight. MiCA, Europe’s extensive crypto rulebook, has already certified 15 stablecoins that color within its lines.
Before the regulatory action, Ethena GmbH had distributed a significant portion of USDe outside of Germany while operating under transitional arrangements.
But for boundary-pushing projects like Ethena, the path forward looks increasingly narrow within the EU’s borders.
As the dust settles, one thing is clear: Germany’s regulators are serious about enforcing their new crypto rules, even if it means sending billions in digital assets packing for distant shores.
