ESMA Sets Deadline for Crypto Firms on Non-Compliant Stablecoins

ESMA's Guidance on Stablecoins

The European Securities and Markets Authority (ESMA) has issued guidance urging crypto firms in the EU to stop providing services related to stablecoins that do not comply with the Markets in Crypto-Assets Regulation (MiCA). This includes halting the holding of such assets for customers. The deadline for addressing existing exposures is set for January 8, 2027, though regulators may impose earlier deadlines.

ESMA's opinion outlines that services regulated under MiCA, such as crypto trading, asset custody, transfers, investment advice, and portfolio management, should not involve non-compliant stablecoins. This means that firms are required to prevent EU customers from purchasing these assets or increasing their holdings.

However, the guidance allows for some flexibility. Firms may assist customers in selling, exchanging, or withdrawing existing holdings of non-compliant stablecoins, but this must be done under close regulatory supervision. The ESMA has made it clear that these measures should be completed as swiftly as possible, ideally before the January 2027 deadline.

While ESMA did not specify which tokens are non-compliant, Coinbase has identified Tether's USDt (USDT) and PayPal's stablecoin, PayPal USD (PYUSD), as examples. As a precaution, Coinbase has advised its European Economic Area customers to withdraw affected balances by October 30, 2023, after which any remaining balances will be converted to USDC or another supported asset.

Key Takeaways

• Deadline for Compliance: January 8, 2027, for crypto firms to stop services with non-compliant stablecoins.
• Temporary Assistance Allowed: Firms may help customers withdraw or exchange existing holdings under regulatory supervision.
• Tokens Identified: USDt and PYUSD are noted as non-compliant by Coinbase, prompting withdrawal recommendations for users by October 30, 2023.