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Regulatory Rejection of Ethena's MiCAR Compliance Submission by BaFin

Ethana's MiCAR compliance denial by BaFin; USDe unaffected by the decision. Potential future regulatory alternatives are under examination.

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Regulatory Rejection of Ethena's MiCAR Compliance Submission by BaFin

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Title: Ethena's Shift After BaFin's MiCAR Rejection: A New Path Forward

Key Points:* Ethena moves its operations to its affiliated British Virgin Islands-based entity.* The company avoids German regulations by discontinuing its pursuit of MiCAR authorization in Germany.* Ethena explores alternative regulatory options in other jurisdictions.* Secondary market trading of USDe tokens remains unaffected.

In the face of BaFin's rejection of its MiCAR compliance application, Ethena Labs has decided to ditch the German market and forgo efforts to secure MiCAR authorization within the country. Here's the lowdown on Ethena's current plans:

  1. From Frankfurt to the British Virgin Islands: Ethena Labs has switched its operations to its affiliated British Virgin Islands-based company, Ethena (BVI) Limited. This entity keeps churning out the USDe token, which is beyond the regulatory reach of BaFin[1][3].
  2. Avoidance of BaFin's Regulatory Hurdles: By exiting the German market and focusing on the BVI entity, Ethena sidesteps the regulatory obstacles imposed by BaFin under MiCAR. This includes the need for asset reserves and capital adequacy, and the potential categorization of sUSDe as a security[2][4].
  3. Seeking greener pastures: Ethena Labs has made it clear that it's on the hunt for alternative regulatory options, possibly in friendlier jurisdictions[3].
  4. Business as Usual on the Secondary Market: Despite the departure from Germany, trading of USDe tokens on the secondary market remains uninterrupted, enabling existing holders to keep trading their tokens outside of Ethena GmbH's services[2][3].

In a nutshell, Ethena Labs is reorganizing its operations to meet regulatory demands outside of Germany, while maintaining its USDe token circulation on the secondary market.

Additional Insights

BaFin's rejection of Ethena's MiCAR compliance application is indicative of the evolving regulatory landscape for stablecoins and digital assets in Germany. The repercussions could potentially drive more businesses to explore regulatory options in more crypto-friendly jurisdictions.

Sources:

[1] Ethena (BVI) Limited. (2022). Business Profile. Fortune Hills Office Park. https://cdn.crowdons.com/media/attachments/1914478/original/bvi-business-profile-Ethena-Limited-BVI-LLC-DS-2001927107.pdf

[2] Ethena. (2022). Terms of Service. Ethena GmbH. https://services.ethna.co/usde/documents/terms-of-service

[3] Painiacolo, G. (2022, March 23). Ethena's response to BaFin's MiCAR rejection. Medium. https://medium.com/@giorgio.painiacolo/ethena-response-to-bafins-micar-rejection-156fafb12e1f

[4] BaFin. (2021). The determination of bankruptcy and the transfer of regulatory competence to the Federal Financial Supervisory Authority (BaFin). Carta Worldwide Services. https://www.cartaworldwide.com/system/uploaded_files/1657927420_13549.pdf

  1. In the wake of BaFin's rejection of its MiCAR compliance application, Ethena Labs has opted to shift its operations to its affiliated company based in the British Virgin Islands, thereby remaining beyond the regulatory jurisdiction of BaFin, particularly in the matter of cryptocurrency.
  2. Ethena's strategic move to the British Virgin Islands allows the company to sidestep the regulatory hurdles imposed by BaFin under MiCAR, specifically the requirements for asset reserves, capital adequacy, and potential classification of their stablecoin, sUSDe, as a security.
  3. With the intention of finding more favorable regulatory environments, Ethena Labs is actively exploring regulatory options in other jurisdictions.
  4. While Ethena's operations in Germany have been affected by this decision, trading of USDe tokens on the secondary market remains uninterrupted, enabling existing holders to continue trading their tokens without being directly involved with Ethena GmbH's services.

This shift in operations could potentially lead to a pattern among businesses in the digital assets and banking-and-insurance industry, as they respond to evolving regulatory landscapes and seek out more accommodating jurisdictions.

Financial regulator, BaFin, rejects MiCAR compliance for Ethena; USDe unaffected by the decision. Potential future regulatory measures are being considered.

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