Ethena Labs has officially ceased all operations within the European Union, including shuttering its German subsidiary. The announcement follows weeks of preparation after the firm’s failed attempt to meet the Markets in Crypto-Assets (MiCA) regulations set by the EU.
The departure was expected by some industry observers, but it still managed to stir sharp reactions across markets. ENA, the firm’s governance token, fell more than 7% shortly after the news went public. This move marks a critical retreat for a company once optimistic about expanding under Europe’s newly unified crypto framework.
Table of Contents
Struggles with MiCA Prompt Full Exit
Ethena Labs’ trouble began in late March when German regulators rejected its application under the new MiCA regime. MiCA, a sweeping set of rules meant to bring digital assets in line with traditional financial standards, proved too high a hurdle. Despite earlier assurances that the rejection was just a minor detour, the firm has now taken definitive steps to leave the region.
The German branch, known as Ethena GmbH, came under intense scrutiny during the MiCA approval process. BaFin, Germany’s financial watchdog, identified what it called “serious flaws” in the company’s application. In addition, there were concerns about the possible sale of unregistered securities in the form of sUSDe tokens, a synthetic stablecoin product. These concerns eventually led regulators to ban any minting or redemption of the firm’s USDe token.
The fallout was swift. BaFin froze the reserves tied to USDe, took down the company’s regional website, and stopped all customer onboarding efforts. This pushed Ethena to reroute its operations through its British Virgin Islands entity, Ethena (BVI) Limited, and effectively cut ties with its European footprint.
Ethena Falls Short as 15 Stablecoins Secure EU Approval
The regulatory environment in the EU is tightening fast. MiCA’s full rollout demands a higher level of transparency and accountability from crypto companies than ever before. To meet MiCA requirements, stablecoin providers must maintain clearly separated reserve assets, ensure full collateral backing, and regularly submit financial reports.
While some major players such as Circle, Crypto.com, Membrane Finance, and Societe Generale have received approval under MiCA rules, others like Tether have opted to stay out for now. In total, five USD-pegged and ten euro-pegged stablecoins have been greenlit as of February.
Read also: Tether Is Preparing First Full Audits For USDT Transparency.
Ethena’s situation reveals the sharp divide between those that can adapt to the EU’s regulatory environment and those that cannot – or choose not to. Ethena’s attempt, despite being serious, fell short of these rising standards.
ENA Token Feels the Aftershock
Ethena’s governance token, ENA, has been on a volatile ride for weeks. Back in early March, signs of progress on the MiCA front led to a brief surge, with ENA nearing a $2.5 billion market cap. The optimism, however, was short-lived, and the market cap is now around $1.53 billion.
Once the MiCA rejection came in, ENA’s value took a downward slide that hasn’t stopped. With today’s official closure of EU operations, the token dropped another 10%, confirming that investor confidence is fading as regulatory uncertainty looms large over the firm’s future.
The European exit may help Ethena regroup in more favorable regulatory territories, but for now, the token’s sharp price fluctuations reflect growing concern from stakeholders.
Secondary Markets Remain Open
Despite halting all primary operations within the EU, Ethena has emphasized that USDe’s listing on secondary markets is unaffected. According to the company, the regulatory crackdown only impacts primary sales and direct minting or redemption. Notably, USDe remains the fourth-largest stablecoin with a circulating value of $4.91 billion.
“We have agreed with BaFin to wind down all activities of Ethena GmbH and will no longer be pursuing the MiCAR authorization in Germany… As a result, Ethena GmbH no longer has any direct customers.”
The statement also confirmed that the German branch “has not conducted any mint or redeem activity” since the MiCA ruling took effect. It’s a clear sign that the company has complied fully with BaFin’s restrictions while finding alternative routes to maintain some presence in global crypto markets.
What Lies Ahead for Ethena Labs
With the EU now in the rearview mirror, Ethena Labs must reassess its growth plans. The company has stated it is looking into “alternative regulatory paths,” though no specific jurisdictions have been named. For now, all efforts are rerouted through Ethena (BVI) Limited.
The key for Ethena is restoring investor trust and securing approval in other regions that might be more welcoming or offer clearer guidance. It may also be an opportunity to streamline operations and reinforce legal compliance from the ground up, outside the tight grip of European law.
Although disappointed by the MiCA denial, the company has not abandoned the idea of long-term compliance. But this moment is undeniably a reset point.
Read also: RLUSD Stablecoin 4 Months After Launch Exceeds Expectations
