EU Regulator Calls for Crackdown on Non-MiCA-Compliant Stablecoins Across Firms

The European Securities and Markets Authority (ESMA) is taking a firm stance on stablecoins that do not comply with the European Union’s Markets in Crypto-Assets Regulation (MiCA). In a recent directive, ESMA urged crypto asset service providers (CASPs) to implement restrictions on non-MiCA-compliant stablecoins by January 31, 2025. This urgent move comes as the EU looks to bolster its regulatory framework for digital assets, and it has significant implications for stablecoin issuers and their market presence in Europe.

What Does the non-MiCA-compliant stablecoins means

MiCA, which aims to regulate all crypto assets within the EU, includes specific provisions for stablecoins, particularly asset-referenced tokens (ARTs). These stablecoins are pegged to a basket of assets, such as fiat currencies or commodities, and are generally designed to maintain price stability. Under MiCA, issuers of ARTs must be authorized within the EU, and they must comply with stringent requirements to protect investors and ensure market stability.

The ESMA’s recent directive emphasizes that CASPs must ensure that any stablecoin not authorized by the EU MiCA regulations should be delisted or restricted from trading by January 31, 2025, unless a “sell-only” mode is implemented, which could extend until the end of Q1 2025.

The looming deadline for CASPs comes after ESMA’s call for urgent action on non-MiCA-compliant stablecoins. By January 31, 2025, firms must either cease offering non-compliant stablecoins or transition to a restricted sell-only model for a period extending until March 31, 2025. This means that while customers will still be able to liquidate or convert their holdings, no new purchases or transactions can occur for non-compliant stablecoins.

This marks a major shift for firms like Tether, which have operated without MiCA authorization but are now faced with the necessity of adjusting to these new regulatory standards. Tether’s USDT, the world’s largest stablecoin by market capitalization, is one of the most high-profile assets likely to be impacted by these changes, as it does not have MiCA approval. Juan Ignacio Ibañez, a member of the Technical Committee of the MiCA Crypto Alliance, confirmed that USDT falls under the category of non-compliant assets in the EU.

The Impact on Tether and Other Non-MiCA-Compliant Stablecoins

Tether’s position is particularly precarious, as Ibañez pointed out, due to the lack of MiCA compliance. He argued that unless Tether applies for MiCA authorization, its stablecoin will be delisted across CASPs by the January 31 deadline, with no exceptions for new transactions.

No trace of USDT should remain, not even in ‘sell-only’ mode, Ibañez stated in a LinkedIn post, underscoring the importance of adherence to MiCA guidelines.

For other stablecoins that do not meet MiCA standards, the ramifications could include being banned from the EU market or severely restricted in their usage. Firms operating in the region must quickly assess whether they need to adjust their operations or face penalties for non-compliance.

For crypto asset service providers (CASPs), the ESMA’s push for action has created a tight deadline to evaluate their stablecoin offerings. CASPs will be required to restrict any non-MiCA-compliant stablecoins from their platforms by January 31, 2025, a move that could disrupt businesses dealing in these assets. While the option for “sell-only” operations exists, CASPs must ensure they comply with EU regulations by the end of Q1 2025, or face potential penalties.

This move comes amid continued uncertainty and confusion surrounding MiCA’s regulations, especially when it comes to the authorization of stablecoin issuers. Many industry players, including Gemini’s head of Europe, have expressed concern over the complexity of the regulatory environment and the challenges in ensuring compliance across the board.

With the new MiCA regulation in place, the EU is setting the stage for a more regulated and stable cryptocurrency ecosystem. The urgency surrounding non-MiCA-compliant stablecoins demonstrates the EU’s commitment to curbing risks associated with unregulated digital assets, particularly in the stablecoin market. Industry leaders predict that other regions may soon follow suit, creating a global push for stablecoin issuers to adhere to more stringent regulatory standards.

In the coming months, crypto asset service providers and stablecoin issuers will need to work closely with national competent authorities (NCAs) to ensure compliance with the MiCA guidelines. This regulatory framework is expected to shape the future of digital asset markets in Europe and beyond.

As the deadline for restricting non-MiCA-compliant stablecoins draws near, crypto asset service providers must make swift and decisive actions to comply with the new regulations. Stablecoin issuers who fail to secure MiCA authorization may find their access to the EU market severely restricted, impacting both their operations and their users. The ESMA’s directive is a clear signal to the crypto industry that regulatory compliance is non-negotiable, and firms must prepare for a future where only compliant assets will be permitted to operate in the EU’s digital asset landscape.

For Tether and other stablecoin issuers, the next few months will be critical in determining whether they can continue their operations in Europe or face significant market disruptions. As the crypto space navigates these changes, one thing is clear: non-MiCA-compliant stablecoins will need to adapt to survive in the evolving regulatory environment. Get more from The Bit Gazette