Germany's financial regulator BaFin has halted the offering of the USDe stablecoin from Ethena GmbH, a subsidiary of Ethena Labs.
Major Concerns from BaFin
BaFin reported serious deficiencies in the authorization process of USDe. The authority instructed the company to freeze asset reserves linked to the stablecoin. Ethena GmbH utilized a transitional arrangement under European MiCAR regulation to continue operations until granted or denied authorization.
Ethena Labs' Response
Ethena Labs stated that no assets had been frozen and that BaFin’s decision wouldn’t affect the listing or the minting and redemption processes of USDe. The company expressed disappointment over the decision but will explore alternative regulatory frameworks.
USDe Risks and Future
The primary risk for USDe is if funding rates turn negative for a prolonged period. Other risks include custodial counterparty risks associated with storing assets on centralized exchanges. Nonetheless, the project offers a unique solution based on crypto-native derivatives.
The future of the USDe stablecoin remains uncertain following BaFin’s decisions, but Ethena Labs is hopeful about adapting to new conditions.
