EU watchdog ESMA tells crypto firms to halt all services for non-MiCA stablecoins

The European Securities and Markets Authority (ESMA) on Oct. 8 told national regulators that crypto firms should stop offering every type of service, from trading to custody and transfers, for stablecoins that do not comply with the EU's Markets in Crypto-Assets Regulation (MiCA). In an opinion addressed to national competent authorities, ESMA said that "CASPs should not provide crypto-asset services in relation to ARTs or EMTs that are not compliant with the applicable requirements under MiCA." Remaining holdings must be wound down within three months of publication.

From trading curbs to custody

MiCA splits stablecoins into two groups: e-money tokens (EMTs), pegged to a single official currency, and asset-referenced tokens (ARTs), pegged to some other asset or basket of assets. Issuers must be authorised in the EU and meet reserve and redemption requirements. The "non-MiCA-compliant" tokens in the opinion are those that fail these conditions and therefore cannot be lawfully offered to the public or admitted to trading in the EU. ESMA did not name any specific token.

The scope is broad. ESMA listed every service defined under MiCA: operating a trading platform, exchange services, execution of orders, reception and transmission of orders, placing, advice, transfer services, custody and portfolio management. Whether delivered individually or in combination, any service that lets EU clients acquire, increase or maintain exposure to such tokens falls under scrutiny. Crypto-asset service providers (CASPs) must put technical, contractual and organisational controls in place to stop EU clients from buying or adding to positions.

ESMA said risk disclosures are not enough. The opinion said that "reliance on warnings, disclosures or client acknowledgements would not sufficiently address the concerns identified in this Opinion," adding that clients are unlikely to be able to assess the risks created by missing issuer-level safeguards.

From the January 2025 statement to this opinion

1. June 30, 2024MiCA's stablecoin rules (Titles III and IV) take effect
2. July 1, 2024Circle says it obtained an electronic money institution licence from France's ACPR and is issuing USDC and EURC in line with MiCA
3. Jan. 17, 2025ESMA and the European Commission publish guidance on non-compliant stablecoins, asking national authorities to ensure compliance by the end of the first quarter of 2025
4. Oct. 8, 2026ESMA issues an opinion widening the scope to all services
5. Jan. 8, 2027Three months after publication, the deadline to clear remaining holdings

The January 2025 guidance relied on the European Commission's Q&A 2404, which said certain services may amount to an offer to the public or admission to trading of a stablecoin. The new opinion leaves that interpretation unchanged but concludes that, regardless of whether a service qualifies as an offer or admission to trading, providing it is incompatible with the duty to act honestly, fairly and professionally in clients' best interests under Article 66(1) of MiCA. ESMA's reasoning is that a CASP still handling such tokens would be knowingly exposing clients to those risks.

No new buying, only selling, moving and safekeeping

National authorities may allow residual services only to the extent needed to protect existing clients. ESMA limited them to liquidation, conversion, withdrawal, transfer or safekeeping of existing holdings. New acquisitions, promotion, trading and continued distribution are not allowed. Even these exceptions must be time-limited, clearly communicated to clients and closely supervised. National authorities should check whether any firm under their supervision deals in such tokens and, where remaining exposures are found, require remediation no later than three months after publication. ESMA said it would regularly monitor how the opinion is applied together with national authorities.

Tether trades at 1,366 won in Korea

The measure targets EU-authorised firms and EU clients, so it does not apply directly to trading in the Korean won markets of domestic exchanges. As of 8:30 p.m. KST on Oct. 8, Tether (USDT) traded at 1,366 won on both Upbit and Bithumb, while USDC traded at 1,367 won on Upbit. That was a little more than 2% above the USD/KRW exchange rate at the time (about 1,339 won per dollar). Upbit's 24-hour trading value was about 84.5 billion won for Tether and about 1.1 billion won for USDC.