- EU regulator ESMA mandates crypto exchanges remove non-compliant stablecoins by end of Q1 2025
- Tether’s USDT will be affected as it lacks EU authorization and has no plans for MiCA compliance
- Exchanges must stop enabling clients to acquire unauthorized stablecoins by January’s end
- Clients holding non-compliant stablecoins have until March to convert to compliant alternatives
- Major exchanges like Coinbase have already begun restricting services for non-compliant stablecoins
The European Securities and Markets Authority (ESMA) has issued a clear directive to the 27 EU member states requiring the removal of non-compliant stablecoins from trading platforms. The announcement, made on Friday, sets a firm deadline of Q1 2025 for full compliance with the EU’s stablecoin regulations.
Under the new requirements, crypto asset service providers (CASPs) must cease offering trading services for unauthorized asset-referenced tokens (ARTs) and electronic money tokens (EMTs). This mandate specifically targets stablecoins that lack proper EU authorization, notably affecting major players like Tether’s USDT.
The timeline established by ESMA requires exchanges to stop enabling new acquisitions of unauthorized stablecoins by the end of January 2025. Current holders of these assets will have until the end of March to convert their holdings to compliant alternatives, ensuring an orderly transition in the market.
Leading cryptocurrency exchange Coinbase has already taken steps to align with these requirements. The company restricted services related to non-compliant stablecoins for its Retail, Exchange, and Prime Vault customers across its European operations starting December 13, 2024.
Tether, one of the largest stablecoin issuers globally, has shown its response to the regulatory pressure by discontinuing its euro stablecoin, EURT, in November. The company has not obtained the necessary e-money license to operate within the EU, unlike competitor Circle, which secured its license in July.
The European Commission has provided additional clarity on the regulations through Peter Kerstens, an advisor involved in drafting the legislation. Kerstens emphasized that the rules are straightforward: unauthorized crypto-assets cannot be listed, regardless of their underlying currency.
Questions had arisen in the crypto community about whether the regulations would affect stablecoins that were already listed before the MiCA regulations came into force. The Commission’s clarification confirms that pre-existing listings are not exempt from the new requirements.
The regulatory framework requires that any entity offering or seeking admission for stablecoins within the EU must either be a bank or an e-money institution and publish a white paper. Third parties may offer these tokens only with the issuer’s consent, and the issuer must still maintain proper authorization.
ESMA’s clarification came after the authority itself sought guidance from the European Commission, highlighting the complexity of implementing these regulations. This consultation process has resulted in a clear interpretation: crypto exchanges qualify as third parties seeking admission and must ensure their listed stablecoins comply with all regulatory requirements.
For crypto exchanges operating in the EU, this means conducting a thorough review of their stablecoin offerings. They must verify that each listed stablecoin either has proper authorization or must be removed from their trading platforms by the specified deadline.
The regulations also address concerns about monetary sovereignty, particularly regarding non-Euro stablecoins. However, these rules primarily focus on real-world payments rather than crypto trading activities.
EU authorities are emphasizing the importance of an orderly transition to prevent market disruption. Exchanges are expected to communicate clearly with their users about the upcoming changes and provide guidance on converting non-compliant stablecoin holdings.
Industry observers note that these measures align with the EU’s broader strategy to create a regulated and secure cryptocurrency market. The clear deadlines and requirements aim to provide stability and protection for market participants.
Current holders of non-compliant stablecoins are advised to stay informed about their exchange’s compliance timeline and prepare for the necessary conversions before the March deadline. Exchanges are expected to provide detailed instructions and support for this transition process.
