ESMA wants custody of non-compliant stablecoins ended as data shows the retreat already under way
The European Securities and Markets Authority (ESMA) has asked the European Commission to prohibit every licensable crypto-asset service involving stablecoins that fail the Markets in Crypto-Assets regulation (MiCA), including custody and transfers, in its response to the Commission’s MiCA review consultation dated 30 September 2026, set out in its submission. The regulator argues that the absence of a clear prohibition creates disparities between compliant and non-compliant issuers and encourages regulatory arbitrage.
Market data suggest the retreat from non-compliant stablecoins on regulated European-facing venues is already well advanced. A July 2026 paper by Nicola Borri and Kirill Shakhnov, covering 14 exchanges and daily pair-volume data from January 2024 to December 2025, studies the shift around MiCA’s compliance deadline. Around the study’s 1 April 2025 event date, the authors estimate that Tether (USDT) trading volume fell about 20% on regulated-facing exchanges relative to global venues, while USD Coin (USDC) gained roughly six percentage points of combined USDT/USDC trading share on the same venues. The authors’ USDC-volume estimate, unlike the share shift, was not statistically significant.
The paper classifies Bitstamp, Coinbase, Gemini and Kraken as regulated-facing because each draws more than 10% of its audience from the European Union. Under the earlier MiCA transition, exchanges had already restructured their European offers: Binance said in March 2025 that it would remove the trading pairs of nine tokens for European Economic Area (EEA) users by 31 March, while keeping deposits, withdrawals, conversions and custody available.
What a custody ban would change
Existing rules restrict how non-compliant stablecoins are offered and traded. ESMA’s proposal would extend enforcement to the service layer itself: custodians and transfer providers would no longer be able to handle tokens that fail MiCA’s requirements. That would reach holders who have stopped trading, not only customers seeking to buy.
The shift is a reversal of ESMA’s own earlier position. Its statement of 17 January 2025 distinguished offering non-compliant stablecoins to the public or admitting them to trading, which was restricted, from simply holding or transferring them, which remained possible.
The exit question
The submission leaves open how a blanket service restriction would reconcile with the EU obligation to return clients’ assets. A Commission answer published via ESMA on 18 February 2026 states that assets returned to a client must be the same type as those held when the withdrawal was requested. ESMA’s submission gives no implementation date, withdrawal exception or wind-down mechanism, and the proposal does not itself ban personal ownership, order tokens frozen or prescribe compulsory conversion.
The Commission’s consultation closed on 30 September 2026, and its page says the resulting review report may, if warranted, be accompanied by a legislative proposal. For traders, the study’s message is that Europe’s stablecoin mix has already tilted toward USDC on the venues that matter for regulated flow, and a custody ban would remove the last licensed route back to USDT.
