The German financial regulatory body, BaFin, has reported discovering “significant shortcomings” in Ethena’s synthetic USDe stablecoin.
Ethena operates as a yield-generating protocol, and its stablecoin currently boasts a market capitalization of $5.4 billion.
The company announced on X that it will “explore alternative frameworks” following the notice that “its application under the MiCAR regulatory framework will not receive approval.”
In an announcement, BaFin mentioned that these deficiencies relate to the “business organization of the bank and breaches of MiCAR regulations, including those pertaining to asset reserves and adherence to capital requirements.”
Bafin further stated that there are reasonable grounds to suspect that Ethena GmbH is publicly offering securities in Germany through ‘sUSDe’ tokens from Ethena OpCo. Ltd. without the necessary securities prospectus.
In reaction to this news, Ethena’s ENA token experienced a decline of 6.5% over the past 24 hours, extending its losses following the announcement, as reported by data from CoinMarketCap.