Ethena Labs has made the decision to officially close its operations in Germany and the EU due to the rejection of its MiCA application. The company had been preparing to exit this market for the past month, and the announcement today caused a significant drop of over 7% in the value of the altcoin, ENA.

The rejection of Ethena Labs' MiCA compliance application by German authorities in late March marked a series of regulatory challenges the company faced in Europe. Initially seen as a minor setback, the firm had plans to shift its focus to other markets. However, the recent decision confirms the closure of its German branch.

According to the company's statement, all activities of Ethena GmbH will be ceased as per the agreement with BaFin. Users previously associated with Ethena GmbH have been transitioned to Ethena (BVI) Limited, with the German branch no longer having any direct customers. Following the regulatory ruling on MiCA, Ethena GmbH has not engaged in any mint or redeem activities.

As a consequence of the ban on USDe stablecoin sales by regulators and the associated restrictions, the closure of the German branch was a foreseeable outcome. The governance token of the network, ENA, experienced significant price fluctuations during the MiCA compliance efforts. Initially, there was a positive response when regulatory approval seemed imminent, but the subsequent rejection and the broader market conditions led to a continued bearish trend.

The introduction of MiCA regulations in the EU has posed challenges for various firms, including Ethena. The implementation of MiCA resulted in Tether's stablecoins being removed from EU exchanges, prompting adjustments to its operations. To adapt to the regulatory framework, many issuers have been striving to achieve compliance. Recently, leading centralized exchanges such as Crypto.com and OKX have obtained the license, consolidating their position in the EU market.