Europe’s markets regulator has asked the European Commission to extend MiCA’s restrictions on non-compliant stablecoins into custody and transfer services, a step that would leave holders of tokens such as USDT without a licensed place to keep or move their money. The request sits in ESMA’s September 30 response to the Commission’s review of the Markets in Crypto-Assets regulation, a consultation that closed the same day.
Under the proposal, every licensable crypto-asset service involving a stablecoin that fails MiCA’s applicable requirements would be prohibited. Custody and transfers are both on that list. That reaches two groups the current rules do not touch: people who still hold the tokens after trading pairs disappeared, and people who want to receive them from anyone holding an EU license.
It is a reversal of the regulator’s own January 2025 position. That statement let platforms stop offering non-compliant tokens for sale while keeping custody and transfer available, on the theory that people selling out of a delisted balance still needed somewhere to park it. European providers ran exactly this playbook. In March 2025 Binance removed nine stablecoins, USDT among them, from European Economic Area trading while keeping deposits, withdrawals, conversions and custody open for existing balances.
What the rules say now
Custody under MiCA’s Article 3 covers safekeeping or controlling a client’s crypto-asset or its access credentials, private keys included. Transfer services cover moving assets on a client’s behalf from one ledger address or account to another. Both are expressly listed licensable services, and Article 59 requires each provider’s authorization to name the services it may offer. A provider license alone does not settle whether a particular token can be serviced; token compliance and provider permission are separate questions.
ESMA argues the current lack of a clear prohibition creates uneven treatment between compliant and non-compliant issuers and invites regulatory arbitrage. The submission is a policy response, not law. The Commission’s review report may, if it judges the case warrants it, come with a legislative proposal, and the consultation page says exactly that.
The exit problem
The detail drawing the sharpest criticism is what the proposal leaves out. Section 3.2 names no implementation date, no exception for withdrawals and no wind-down mechanism. Ending custody requires some route back to the client for assets the provider already controls, and the existing custody framework at Article 75 requires providers to return client assets as soon as possible, segregated from their own holdings throughout.
A Commission answer dated February 18, 2026 adds a further wrinkle. Assets returned must be the same type the client held when the withdrawal was requested. A provider may offer conversion into fiat or another crypto-asset at that point, but only if the client asks for it and the provider holds permission for the additional service. If custody itself became a prohibited service, the conversion route could close along with it, and the holder would be stranded by two rules pointed at each other.
ESMA’s 2025 guidance had already acknowledged that holders of delisted tokens face worse execution conditions when they sell. The new approach would tell those holders where the worse conditions end: nowhere, if no off-ramp remains legal. The regulator provided no timetable for how a holder of, say, $50,000 in a delisted token would get euros back.
Why now, and who gains
The submission gives its reasoning plainly: disparities between issuers who built compliant European operations and those who did not, plus arbitrage through tokens regulated elsewhere. Frozen assets and fraud have been part of the political backdrop, since the Commission’s consultation also covered freezing powers and fraud-site blocking, and stablecoin oversight has been the most contested part of the MiCA review.
The practical stakes are large. Tether’s USDT is the biggest token in scope and by most estimates sits in European wallets in meaningful volume, despite formal availability for sale ending in early 2025. Circle, the issuer of the compliant USDC, has spent this year pushing the Commission in the opposite direction. An October 1 comment letter to the Commission noted that many of the largest stablecoins by market value fall outside MiCA and asked for amendments on cross-border issuance and reserve requirements, arguing that restrictive rules would push European users toward foreign competitors rather than into regulated products.
The market context makes the timing awkward. The United States is moving in the opposite direction, building its GENIUS Act framework to license stablecoin issuers rather than exclude them, and the Federal Reserve has since proposed reserve and capital standards under it. If the ESMA position becomes law, the two largest stablecoin jurisdictions would run models pointing at each other: Europe restricting non-compliant tokens out of licensed services, America licensing issuers at home.
What happens next
For issuers, the choice would harden into a fork: a MiCA-compliant euro configuration for Europe, a GENIUS configuration for the United States, or exit from one of the two markets. For exchanges, running dual rulebooks carries compliance cost that mid-size venues may not absorb. For holders, the practical question is the one ESMA did not answer: what happens to the money already sitting in a delisted token when the last legal off-ramp closes.
None of this is decided. The text on the table is a consultation response, and the Commission’s review report has no published date. But the direction is clear enough that issuers, custodians and exchanges have begun responding in public, and the next round of lobbying will land on a Commission that has already received sharply opposing advice from ESMA and from the largest compliant issuer.