German Regulator Orders Stablecoin Issuer Ethena to Cease Operations, Cites MiCA Compliance Breaches

Germany’s financial watchdog has made its first major enforcement move under the European Union’s new crypto regulatory framework, ordering Frankfurt-based Ethena GmbH to shut down operations and liquidate its USDe stablecoin business.

The decision comes amid a broader push to impose tighter oversight on crypto firms across the bloc. The Federal Financial Supervisory Authority (BaFin) issued the order on Monday, instructing Ethena GmbH to cease all authorized business activities and settle its outstanding obligations.

BaFin had already identified what it called “serious deficiencies” in Ethena’s organizational setup and compliance with the Markets in Crypto-Assets Regulation (MiCA), leading to earlier supervisory sanctions in March.

“Ethena GmbH took advantage of a transitional arrangement under MiCAR to enter the German market. According to this arrangement, issuers that issued asset-referenced tokens under the law applicable before June 30, 2024, may continue to do so until they are granted or denied authorization,” BaFin said.

MiCA Enforcement Begins with High-Profile Crypto Exit

Ethena GmbH, a local subsidiary of synthetic stablecoin developer Ethena Labs, issued a dollar-pegged token known as USDe. The company claimed to maintain its token’s value through a mix of crypto-backed reserves and delta-hedging strategies.

However, BaFin found that the firm failed to meet MiCA’s strict requirements for transparency, asset segregation, and reserve adequacy.

Ethena had attempted to operate under MiCA’s transitional rules, which allowed pre-existing issuers to function temporarily while seeking full authorization. However, the company withdrew its license application on April 3, effectively ending its legal basis to operate in the EU.

Following this, BaFin prohibited further transactions and ordered a structured redemption of all circulating USDe tokens. The company must now execute this process under BaFin’s direct supervision. USDe is the fourth-largest stablecoin globally with a $4.9 billion valuation, according to CoinMarketCap. It ranks behind Tether (USDT), USDC, and DAI.

In addition to halting operations, BaFin imposed a € 600,000 coercive penalty and froze Ethena’s ability to move or dispose of funds to ensure the payment of creditors' obligations.

Ethena Labs confirmed that it has shifted all relevant users to a different entity, Ethena (BVI) Limited, stating that “no ongoing relationship with Ethena GmbH” remains. The firm had already paused mint and redeem functions for USDe in March when BaFin first stepped in.

Europe's Stablecoin Landscape Under MiCA

Ethena’s forced exit underscores the growing regulatory pressure on stablecoin issuers. MiCA requires issuers to hold properly backed reserves, segregate user assets, and submit regular reports.

According to regulators, that model is now under question. BaFin found that Ethena GmbH failed to meet MiCA’s organizational and capital requirements, particularly those concerning asset segregation and reserve quality.