The European Securities and Markets Authority (ESMA) has proposed expanding Europe’s restrictions on non-compliant stablecoins to include the services that allow customers to store and move them. Submitted in response to a review of the EU's Markets in Crypto-Assets regulation (MiCA), the recommendation asks the European Commission to ban all licensable crypto-asset services involving stablecoins that do not meet regulatory standards.
If adopted, the change would eliminate the option for holders to keep non-compliant tokens with a licensed custodian after trading pairs are removed. This represents a shift from ESMA's previous approach in January 2025, which indicated that custody and transfer services could continue even after tokens were removed from trading.
Under MiCA definitions, custody involves safeguarding or controlling client crypto-assets and private keys, while transfers cover moving assets between addresses on a client's behalf. ESMA argues that allowing custody for non-compliant tokens creates regulatory disparities and facilitates arbitrage between compliant and non-compliant issuers.
The current submission is a policy proposal rather than an enacted law, and the European Commission will determine whether to issue a legislative proposal. The proposal does not ban personal ownership, freeze tokens, or mandate compulsory conversion, leaving questions regarding how a future restriction would interact with existing rules requiring providers to return client assets upon request.
