The European Securities and Markets Authority aims to expand European restrictions on non-compliant stablecoins past mere trading, targeting the services that allow customers to store and transfer them. If implemented as written, this modification would eliminate the possibility of leaving such tokens with a regulated custodian once their trading pairs are removed.
Within its September 30, 2026 response concerning a review of the European Union’s Markets in Crypto-Assets regulation (MiCA), ESMA requests that the European Commission outlaw all licensable crypto-asset services involving stablecoins that fail to meet the framework’s mandated criteria. Both custody and transfers are included under this service category, meaning the impact would affect both new buyers and current holders who have ceased trading.
This marks a shift from the regulator’s stance in January 2025, which indicated that basic custody and transfer functions ought to remain accessible. While this might grant compliant tokens a distribution advantage in Europe, the proposal does not inherently trigger a compulsory conversion schedule or a global shift in demand.
The permission left after delisting
ESMA’s statement on January 17, 2025, made a distinction between offering non-compliant stablecoins to the public or admitting them to trading, versus simply holding or moving them. Trading venues were expected to pull these tokens, while other operations had to halt if they amounted to a public offering.
Under that initial transition phase, acquisition curbs were anticipated by the close of January 2025, alongside temporary sell-only services lasting through the end of that quarter.
For investors, the distinction regarding custody was significant. Losing access to a trading pair did not automatically mean losing the infrastructure that protected an existing balance or allowed withdrawals. ESMA noted that investors holding those assets could encounter inferior execution conditions, even though custody and transfer functions stayed available.
A precedent illustrates this separation. In its report from March 3, 2025, CryptoSlate indicated that Binance intended to drop trading pairs for nine tokens for European Economic Area users by March 31, while continuing to support deposits, withdrawals, conversions, and custody. This was the exchange’s stated plan for March 2025.
The September feedback aims to swap this activity-specific division for a broader asset-compliance standard. ESMA contends that the absence of a distinct ban generates inconsistencies between compliant and non-compliant issuers, paving the way for regulatory arbitrage.
This broad scope derives from the definitions found in Article 3 of MiCA. Custody encompasses safeguarding or overseeing client crypto-assets or their access tools, such as private keys. Transfers refer to shifting assets on behalf of a client between ledger addresses or accounts. Both are explicitly defined services, with Article 82 outlining client agreement guidelines for transfers.
Furthermore, provider licensing remains distinct from token compliance. Article 59 mandates authorization as a crypto-asset service provider, or appropriate permissions for designated financial entities, specifying that authorizations must detail allowed services. Holding a provider license does not automatically determine whether a specific stablecoin is eligible for servicing.
Consequently, a current holder would not bypass the proposed restriction by choosing never to trade again. If this wording were enacted into law without exemptions, the custodian’s ongoing safekeeping activities would fall under the ban.
ESMA’s submission functions as policy advice rather than a finalized legal amendment. The Commission’s consultation closed on a September 30 deadline, and its documentation notes that the resulting review report may prompt a legislative proposal if deemed necessary.
Section 3.2 of ESMA’s filing lacks any timeline for implementation, exceptions for withdrawals, or wind-down procedures. This omission is critical because terminating custody necessitates a method to return assets already managed by a provider, especially since the suggested ban also targets transfer capabilities.
Existing custody rules offer a point of reference. Article 75 mandates protocols for returning client crypto-assets or their access tools at the earliest opportunity. Client holdings must also be kept separate from the provider’s own assets.
A clarification from the European Commission via ESMA, issued on February 18, 2026, adds that returned assets must match the type held when the client initiates a withdrawal. A provider may facilitate a conversion into fiat or another crypto-asset, provided the client explicitly requests it at withdrawal and the provider holds authorization for that additional service.
This current interpretation does not resolve how a future sweeping service ban would manage exits. Nonetheless, it clarifies why delisting, ending custody, and mandatory conversions cannot be viewed as interchangeable outcomes. Lawmakers would need to figure out how any fresh prohibition aligns with the mandate to return assets.
The stablecoin proposal is directed at these professional services. It does not explicitly outlaw individual ownership, mandate the freezing of tokens, or enforce forced conversions. A holder’s capacity to keep an asset is a separate matter from a licensed entity’s ability to hold or transfer it on that customer’s behalf.
Trading shares do not measure custody exposure
Previous delistings demonstrate how trading activity can shift on Europe-facing platforms without triggering a comparable transformation across the broader market.
In a research paper from July 2026, Nicola Borri and Kirill Shakhnov analyze the trading of dollar-pegged tokens USDT and USDC across 14 platforms chosen from the top 30 centralized exchanges listed on CoinMarketCap. Their daily volume metrics sourced from CryptoCompare span from January 1, 2024, to December 7, 2025.
The researchers categorize Bitstamp, Coinbase, Gemini, and Kraken as “regulated-facing” because their Similarweb EU audience proportions exceed 10%, with all four also recording US audience shares above 10%. The remaining 10 platforms are deemed globally focused, a group that includes Binance despite its EEA delistings. This audience metric does not track individual EU resident trades nor does it cleanly divide legal exposure.
Near the study’s April 1, 2025 event marker, the authors calculate that USDC’s proportion of combined USDT and USDC trading grew by approximately six percentage points on regulated-facing exchanges compared to global platforms. This estimation spans a 30-day window utilizing smoothed, detrended figures, capturing a relative shift in trading patterns between venue categories.
The researchers estimate that USDT trading volume dropped roughly 20% on regulated-facing exchanges relative to global counterparts, whereas the figures for USDC volume changes lacked statistical significance. USDC’s market share grew primarily because USDT activity shrank within that comparison, rather than the study proving a parallel expansion in USDC utilization.
Overall ratios of USDC-to-USDT trading volume across the tested group remained largely stable around the event date. This reflects exchange turnover within the sample rather than global demand or European custody balances. Neither the legal documents nor the study provide a total figure for the holdings that a future custody ban might impact.
Should the proposal become law in its current iteration, compliant tokens could retain access to regulated custody and transfer pipelines that non-compliant assets would forfeit. For users who rely on a provider to secure and move a dollar-pegged balance, regulatory compliance could dictate the asset’s utility well beyond the mere presence of a trading pair.
The next critical text to watch will be a legislative amendment, specifically regarding its scope, enforcement timeline, and handling of existing balances. The way it reconciles the termination of custody with the return of client assets will dictate whether and how current holders are forced to exit regulated services.