BaFin, the German financial regulatory authority, has prohibited all public sales of Ethena GmbH’s USDe (USDe) — a synthetic dollar — claiming that the token violates the European Union’s MiCAR regulations and accused the firm of selling unregistered securities in the region.

According to the announcement from the regulator, BaFin has ordered the firm to freeze the reserve assets that back the token, close down the website portal, and ordered the firm to stop taking new customers.

The regulator also appointed a representative to monitor the ongoing situation with Ethena GmbH In a translated statement, the regulator wrote:

“The BaFin also has reasonable grounds to suspect that Ethena GmbH in Germany sells securities in the form of sUSDe  tokens from Ethena OpCo. Ltd. without the required prospectus.”

“The USDe and sUSDe tokens are interconnected in such a way that investors can receive a sUSDe token in exchange for a USDe token,” the regulator continued.

Despite the ban on primary sales and issuance of the token, the regulator said that secondary sales of the token will not be prohibited or affected.

Ethena Labs also said that the backing of USDe remains unaffected and the token can still be redeemed via Ethena BVI Limited, despite the recent announcement from the German financial regulator.

Source: Ethena Labs

Ethena GmbH files for MiCA approval

Ethena GmbH submitted a request for regulatory approval under MiCA on July 29, 2024, and the firm expected to be “grandfathered” into the existing regulatory framework.

However, BaFin denied the application on March 21, citing “serious deficiencies in the business organization” and a lack of compliance with the MiCA framework.

BaFin acknowledged that there are currently around 5.4 billion Ethena tokens in circulation. However, many of these tokens were minted outside of the German jurisdiction and before MiCA took effect.

Ethena attracts investment for its products

Despite the risks associated with synthetic dollars, Ethena continues to attract institutional investment for its products.

Ethena raised over $100 million from investors in February 2024 to launch a new token called iUSDe geared toward institutional investors.

The firm also partnered with World Liberty Financial, a decentralized finance (DeFi) protocol started by US President Donald Trump in December 2024.

As part of the agreement, World Liberty Financial purchased 500,000 ENA tokens — the governance token of Ethena.

On February 26, the MEXC crypto exchange also announced a $20 million investment in Ethena’s USDe to promote stablecoin use.

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The US Treasury Department has dropped cryptocurrency mixer Tornado Cash from its sanctions list, the agency said on March 21. 

The removal follows a January ruling by a US appeals court, which said the Treasury’s Office of Foreign Assets Control (OFAC) cannot sanction Tornado’s smart contracts because they are not the property of any foreign national. 

According to the January court ruling, “Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity, meaning […] OFAC overstepped its congressionally defined authority.”

In a March 21 statement, the Treasury said OFAC removed several dozen Tornado-affiliated smart contract addresses on the Ethereum blockchain network from its sanctions list. 

Tornado’s native token, Tornado Cash (TORN), is up around 60% on the news, according to data from CoinMarketCap. 

As of March 21, TORN has a market capitalization of around $73 million and a fully diluted value (FDV) of nearly $140 million, the data shows. 

OFAC is the Treasury’s office for administering economic and trade sanctions on states and foreign nationals.

Tornado Cash lets users pool crypto deposits into a mixer and then withdraw it later to different wallet addresses, making the original funding source difficult to track.

TORN is up around 60% on the news. Source: CoinMarketCap

Related: Tornado Cash dev Alexey Pertsev’s bail a ‘crucial step’ in getting fair trial, defense says

Money laundering allegations

In August 2022, OFAC sanctioned Tornado Cash after alleging the blockchain protocol helped launder cryptocurrency stolen by Lazarus Group, a North Korean hacking outfit. 

Lazarus Group has allegedly stolen billions of dollars in crypto through various cyberattacks.

In February, Lazarus was accused of pilfering $1.4 billion from digital asset exchange Bybit in the largest-ever crypto exploit. 

In total, Tornado Cash has purportedly facilitated the laundering of more than $7 billion in illicit funds since the protocol was launched in 2019, according to the US Treasury.

In 2024, a Dutch court found Alexey Pertsev, one of Tornado Cash’s developers, guilty of money laundering and sentenced him to 64 months in prison. 

In February, Pertsev was released on house arrest, while he prepared an appeal of his conviction. 

The Ethereum Foundation has pledged to donate $1.25 million for Pertsev’s defense. 

“Privacy is normal, and writing code is not a crime,” the EF wrote in an X post while announcing the donation on Feb. 26.

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US President Donald Trump wants to make his country a “Bitcoin superpower,” but the question remains as to who he is competing against. 

Speaking at Blockwork’s Digital Asset Summit on March 20 to a crowd of crypto industry executives and observers, he said, “Together we will make America the undisputed Bitcoin (BTC) superpower and the crypto capital of the world.”

The US crypto industry has benefited greatly from preferential executive orders coming out of Trump’s White House, including the establishment of a “strategic Bitcoin reserve” — a move advocates regard as a key metric for Bitcoin adoption.

However, many other countries, including major US trade partners, are just not ready to take on Bitcoin as a reserve asset, begging the question of who the US is competing against to become a “Bitcoin superpower.”

US allies, trade partners and rivals aren’t competing on Bitcoin

Compared to major trade partners and geopolitical rivals, the US is certainly far ahead of the game in terms of Bitcoin adoption. Neither the European Union, China, Mexico nor Canada have taken such drastic steps toward institutionalizing the asset.

China, the US’ largest trade partner by far and also its most prominent geopolitical opponent, has taken a strong stance against the asset, initially banning it outright before softening its approach slightly. China now allows mining operations but strictly prohibits the use of Bitcoin.

Overall, the government has preferred to concentrate its efforts on developing a retail central bank digital currency in the form of the digital yuan. 

The European Union, another major US trade partner, passed its Markets in Crypto-Assets regulatory framework in May 2023, which came into full implementation by member states at the end of 2024. 

While the EU is ahead of the US in terms of passing concrete legislation, it offers far less preferential terms to the industry than those expected in the US’ parallel legislation currently circulating in Congress.

Crypto user penetration in the EU is expected to remain essentially stagnant this year, and cryptocurrency’s popularity is low overall among its wealthiest economies. No member state has a Bitcoin reserve.

Even in crypto-friendly Switzerland, which saw $52.4 billion in US service exports in 2024, there are limits to crypto endorsement and adoption. On March 1, Swiss National Bank President Martin Schlegel said Bitcoin wasn’t suitable as a reserve asset, citing stability, liquidity concerns and security risks.

Germany’s central bank chief, Joachim Nagel, has also dismissed the idea of a Bitcoin reserve, while Canadian Prime Minister Mark Carney has previously criticized Bitcoin as being a poor form of money. 

Related: What Canada’s new Liberal PM Mark Carney means for crypto

South Korea doesn’t feel ready to hold Bitcoin as a reserve asset, with the Bank of Korea stating that BTC is volatile and does not meet International Monetary Fund standards. 

Russia, for its part, has allowed crypto to be used in international settlements to circumvent sanctions. The central bank is also preparing a three-year experiment to allow select investors to trade crypto. Some legal scholars in the country have suggested establishing a crypto fund consisting of assets seized in criminal proceedings, although the Duma has yet to form one.

Critics and proponents lambast “strategic Bitcoin Reserve” 

Critics have questioned the strategic value of the US Bitcoin reserve and who it benefits in the long run. 

Cornell economics professor Eswar Prasad said, “This is neither a strategic nor sensible idea but instead benefits bitcoin holders while sticking US taxpayers with the bill and exposing the government to financial risks. The US government would become a key driver of bitcoin’s price on the way up and down.”

As noted by TLDR News, the point of most strategic reserves is to stock commodities that are deemed critically important to the function of a country’s economy. Governments can also create them to stabilize the price of goods that are in high demand. The US has strategic reserves of oil and grain, while China even has a strategic pork stockpile. 

The Bitcoin strategic reserve does neither of these, as there is no great demand among Americans for Bitcoin, and Bitcoiners certainly don’t want the price to remain stable. 

George Selgin, a senior fellow and director emeritus at the Cato Institute’s Center for Monetary and Financial Alternatives, said the reserve’s stated goal of helping pay off US national debt was unrealistic.

“The plan’s million-coin stash would have to more than double in value during its 20-year holding period just to compensate for the plan’s implicit interest cost. Second, the stockpile must eventually be sold to realize the gains, and you can bet that the same bitcoin holders who have managed to get the government to keep the bitcoin it already has will cry foul if it ever tries to sell any new coins it acquires,” he stated.

Claims of it serving as a digital Fort Knox are “just as dubious,” he said, as the gold contained therein hasn’t propped up the value of the dollar since Richard Nixon was president and took the dollar off of the gold standard. 

Even Bitcoiners have taken a crack at the reserve. Charles Edwards, founder of Bitcoin and digital asset hedge fund Capriole Investments, criticized the “hold only” policy of the reserve, calling it “disappointing” and a “pig in lipstick.”

Source: Charles Edwards

The reserve even proved to be something of a non-starter for Bitcoin price, with price action remaining relatively stable after Trump signed the executive order on March 6. 

As it stands, the US is leading a race that no one else is running. But things could change quickly. Right-wing parties sympathetic to the creation of Bitcoin reserves have been on the rise in European elections. 

Brazil, a major economy in the Western hemisphere, has also been weighing the possibility of a Bitcoin reserve. 

Furthermore, the US Bitcoin reserve allows the Treasury to purchase Bitcoin so long as it can do so in a budget-neutral manner that doesn’t come at a cost to taxpayers. The full effect of the reserve, and its influence on Bitcoin adoption, may yet be felt. 

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