Ethena Abandons Germany Over MiCA Compliance
Regulatory squeeze forced the $4.9-billion crypto protocol to exit EU's largest economy
Ethena, a major DeFi protocol managing $4.9 billion in assets, has been forced to withdraw from Germany after regulatory intervention, signalling a tougher stance that could ripple across global crypto markets.
The protocol, which issues the synthetic dollar stablecoin USDe, announced yesterday it would "wind down all activities" of its German entity following pressure from the Federal Financial Supervisory Authority, or better known as BaFin, the country's financial watchdog.
BaFin identified what it called "serious deficiencies" in Ethena's operations, effectively banning the minting and redemption of USDe tokens and imposing restrictions on the company's asset reserves.
The regulator's intervention forms part of Germany's broader crackdown on cryptocurrency platforms, with authorities shuttering 47 exchanges in 2024 alone in efforts to combat illicit financial activities.
Ethena's native token dropped 6-7% on the news, currently trading at $0.28, about 80% below its all-time high.
Retreat to Tax Haven
Rather than complying with the EU's stringent Markets in Crypto-Assets Regulation (MiCA), Ethena has transferred its user base to an entity based in the British Virgin Islands, a jurisdiction known for its lighter regulatory touch.
"All whitelisted users previously interacting with Ethena GmbH have at their request been onboarded with Ethena (BVI) Limited instead," the company stated.
This regulatory arbitrage allows Ethena to continue serving customers whilst sidestepping European oversight — a playbook crypto critics argue undermines consumer protection.
The German regulator's classification of USDe as a potential security rather than a straightforward stablecoin creates significant uncertainty for similar products.
For British crypto investors, the regulatory spillover could mean fewer available products as companies reassess their European operations.
Secondary market trading of USDe tokens remains unaffected for now, but redemptions through official channels have ceased for German users.
With regulators increasingly coordinating their approaches, the days of regulatory arbitrage may be numbered for crypto firms hoping to serve European markets whilst avoiding compliance costs.
As BaFin's actions mirror the EU's broader MiCA framework implementation, the exit highlights the growing divide between regulated entities like Crypto.com and OKX who have secured licenses, and those choosing to operate from jurisdictions with lighter oversight.