ESMA Proposes End to Custody for Non-Compliant Stablecoins

The European Securities and Markets Authority (ESMA) has proposed ending EU custody and transfer services for non-compliant stablecoins. This is a further step in regulating the crypto-asset market, following ESMA's January 2025 approach, which allowed custody and transfer to remain possible even if trading pairs were delisted.

The proposal targets professional services, not personal ownership or freezing of assets. It would require licensed custodians to return clients' stablecoins, but does not specify how existing balances would be handled.

ESMA argues that the lack of a clear prohibition creates disparities between compliant and non-compliant issuers, facilitating regulatory arbitrage. The proposal is part of the EU's Markets in Crypto-Assets regulation (MiCA), which aims to establish a harmonized framework for crypto-assets across the European Union.