The German financial supervisory authority BaFin said it identified “serious deficiencies” in Ethena’s USDe token, which the company calls a synthetic dollar, and forbade the issuer from offering it to the public with immediate effect.

The European Union’s Market in Crypto Assets (MiCA) regulations for issuers of stablecoins, tokens whose value is tied to another asset, took effect on June 30 last year. Ethena GmbH has been issuing USDe since June 28, according to BaFin. Companies were allowed to continue issuing their tokens while applying for a MiCA license, unless ordered to stop.

“During the ongoing licensing process, BaFin has identified, among other things, serious deficiencies in the bank’s business organization and violations of MiCAR requirements, such as those regarding asset reserves and compliance with capital requirements,” the regulator said.

USDe counts as an asset-referenced token because it is “a crypto asset whose value stability is to be maintained by reference to other assets, rights, or currencies,” BaFin said.

Ethena is the yield-generating protocol that markets the $5.4 billion token as a “synthetic dollar” with its price anchored at $1. The token uses cryptocurrencies including bitcoin (BTC) and ether (ETH) as backing assets, pairing them with an equal value of short perpetual futures positions on various exchanges.

The strategy generates income for the protocol when perpetual funding rates are positive and passes on some of the income as yield to those who stake USDe (sUSDe). The protocol also issues the USDtb stablecoin, backed by BlackRock’s tokenized Treasury bill fund.

“BaFin also has reasonable grounds to suspect that Ethena GmbH is publicly offering securities in Germany in the form of ‘sUSDe’ tokens of Ethena OpCo. Ltd. without the required securities prospectus,” the regulator said.

Ethena said on X that it will “continue to evaluate alternative frameworks,” after being notified that the “application under the MiCAR regulatory framework will not be approved.”

Ethena’s governance token, ENA, had dropped 6.5% in the past 24 hours, extending losses following the announcement, according to CoinMarketCap data.

Krisztian Sandor contributed to this article.

UPDATE (March 21, 16:37 UTC): Adds MiCA in second paragraph, regulator quote in third, USDe explanation starting in fifth.

U.S.-based asset manager Fidelity Investments has filed paperwork to register a blockchain-based, tokenized version of its U.S. dollar money market fund, aiming to join the tokenized asset race.

According to a Friday filing to the U.S. Securities and Exchange Commission (SEC), the company seeks to register an “OnChain” share class of its Fidelity Treasury Digital Fund (FYHXX) and use blockchains as transfer agent. FYHXX holds cash and U.S. Treasury securities and was launched late last year.

The OnChain class of the fund currently uses the Ethereum (ETH) network, and the firm may expand to other blockchains in the future, the filing said. The registration is subject to regulatory approval, with the product expected to become effective on May 30.

The filing happened as global banks and asset managers increasingly put traditional financial instruments such as government bonds, credit, and funds on blockchain rails, a process often referred to as tokenization of real-world assets (RWAs). They do so to pursue operational and efficiency gains and faster, around-the-clock settlements.

Fidelity, with $5.8 trillion in assets under management, is the latest traditional financial heavyweight seeking to enter the fast-growing tokenized U.S. Treasuries space.

Blackrock (BLK), in partnership with digital asset firm Securitize, launched a similar tokenized T-bill fund last March called BUIDL and has become the market leader with nearly $1.5 billion of assets, rwa.xyz data shows.

Franklin Templeton’s fund, which was the first on-chain money market product, gathered $689 million in assets since its 2021 debut.

The entire tokenized U.S. Treasury market is currently worth $4.77 billion, growing almost 500% over the past year, per rwa.xyz.

Fidelity is also one of the largest issuers of spot bitcoin and ether exchange-traded funds (ETF) in the U.S., with its $16.5 billion FBTC and $780 million FETH, per SoSoValue data.

Animal spirits in the crypto industry continue to be evident amid the eased regulatory stance of the Trump administration, with leading U.S. spot exchange Coinbase (COIN) in advanced acquisition talks with leading global derivatives exchange Deribit, reports Bloomberg.

According to the story, the companies have notified Dubai regulators (where Deribit is licensed) about the discussions.

Bloomberg earlier this year — alongside rumors that Kraken was discussing an acquisition of Deribit — reported Deribit could be valued in the area of $4 billion to $5 billion.

Mostly known for its spot trading business, Coinbase (COIN) would be making a big push into the highly profitable crypto derivatives market with a purchase of Deribit, which saw trading volume in 2024 of nearly $1.2 trillion — almost double that of the year prior.

Earlier this week, another U.S. crypto exchange — Kraken — boosted its derivatives business with a $1.5 billion deal to purchase Ninja Trader.