Eight days after asking for a law

The European Securities and Markets Authority published an opinion on Thursday telling national regulators what it expects of crypto firms licensed under the Markets in Crypto-Assets Regulation when clients hold stablecoins that do not comply with it. The answer is to stop. "ESMA considers that CASPs should not provide crypto-asset services in relation to ARTs or EMTs that are not compliant with the applicable requirements under MiCA (non-MiCA compliant ARTs or EMTs)," the opinion says, using the regulation's terms for crypto-asset service providers, asset-referenced tokens and e-money tokens. According to ESMA's announcement, that covers every service MiCA licenses, from running a trading platform and exchanging tokens to transfers, custody, advice and portfolio management, whether provided individually or in combination.

The opinion names no tokens. Tether's USDT, the largest stablecoin by market value, is the standout large example of one not authorised under MiCA, and PayPal USD, the third largest, is not authorised either, CoinDesk reported. Between them, Tether and Circle, the issuer of the second-largest, USDC, account for most of the stablecoins in circulation, and their reserves look nothing alike.

What is new is the reach. ESMA's earlier supervisory guidance on the subject, a public statement of 17 January 2025, asked trading platforms to stop making such tokens available by the end of the first quarter of 2025, allowed sell-only services until then, and turned on whether a given service amounted to offering the token to the public or seeking its admission to trading. In that statement ESMA said mere custody and transfer of these tokens should remain possible. The new opinion says its conclusion does not depend on whether each service, by itself, is an offer to the public or an admission to trading. It rests instead on the duty in Article 66(1) of MiCA to act honestly, fairly and professionally in clients' best interests: a firm providing any service in a non-compliant stablecoin is presumed to breach it, because it would be knowingly exposing clients to risks that come from the missing issuer safeguards.

Eight days earlier, by our count, ESMA had asked for the same result by legislation. In its response of 30 September to the Commission's consultation on reviewing MiCA, it said the current framework left uncertain how far authorised firms could keep facilitating unauthorised stablecoins. "To achieve legal clarity, ESMA invites the Commission to amend the Regulation explicitly providing that a CASP cannot provide any licensable service under MiCA in relation to ARTs or EMTs that are not compliant with the applicable requirements under MiCA." Any amendment is some way off; the Commission's consultation page says the resulting review report may, if warranted, come with a legislative proposal, CryptoSlate noted. The opinion does not wait for it. It is issued under Article 29(1)(a) of ESMA's founding regulation, which tasks the authority with building a common supervisory culture among national regulators, and it is those regulators who apply it.

The clock is short. Where national authorities find clients still holding such tokens through licensed firms, they should require the positions to be remediated as soon as possible and no later than three months after publication, which CoinDesk puts at 8 January 2027. In the meantime national authorities may allow firms to offer only strictly limited residual services needed for an orderly wind-down: the opinion's body lists liquidation, conversion, withdrawal, transfer and safekeeping of existing holdings, and its conclusion lists sell-only, conversion, transfer and withdrawal. None of it may support new purchases, promotion, trading or continued availability, and all of it should be time-limited, clearly communicated to clients and closely supervised. Firms are also expected to put technical, contractual and organisational controls in place to stop EU clients acquiring or adding to positions.

Telling customers about the risk will not do. "ESMA considers that reliance on warnings, disclosures or client acknowledgements would not sufficiently address the concerns identified in this Opinion." MiCA's protections work together, the opinion argues, so clients cannot be expected to judge what the absence of all of them means, and firms' own assessments could differ in scope, method and conclusions. It gives three reasons for closing the door entirely: leaving non-compliant tokens available through licensed firms would let issuers circumvent the stablecoin rules; it would put compliant issuers, which carry redemption, reserve, governance and disclosure obligations, at a disadvantage to those that bear no equivalent obligations; and it would undermine investor confidence in a market where tokens of the same kind face different rules.

For many users the practical change may be modest. Several platforms had already restricted USDT for European users, and MiCA's full rules for crypto platforms took effect on 1 July, CoinDesk noted. The difference is for clients who kept such tokens in custody at a licensed firm after the trading pairs were removed, which the 2025 statement allowed. They will have to follow their platform's instructions; some may be able to sell or withdraw during the wind-down, and others may face an earlier cut-off, CoinDesk reported. The opinion governs what licensed firms do. It says nothing about tokens that people hold in their own wallets.

ESMA says it will monitor, with the national authorities, how quickly the opinion is applied. National regulators will decide how individual platforms deal with remaining client balances within the three-month limit, according to CoinDesk. Whether the Commission writes the prohibition into the regulation itself is now a question about legal certainty rather than about what licensed firms in the EU are expected to do.