ESMA asks EU to ban custody services for noncompliant stablecoins

Europe’s securities regulator wants to close what it sees as a loophole that lets banks and exchanges keep safeguarding and moving stablecoins that have already failed the bloc’s compliance test. If European lawmakers adopt the proposal, holders of noncompliant tokens could lose access to licensed custody and transfer services even if they never intend to trade again.

• ESMA’s September 30, 2026 submission asks the EU Commission to ban every licensable crypto-asset service for stablecoins that fail MiCA
• The ban would cover custody and transfer, reversing ESMA’s January 2025 approach that those services could continue after delisting
• No implementation date, withdrawal exception, or wind-down mechanism appears anywhere in ESMA’s September submission

• 9/30/26 deadline for ESMA’s response to the EU Commission’s MiCA review consultation
• 1/17/25 date of ESMA’s statement distinguishing services for delisted stablecoins
• ~6 pts USDC’s estimated trading-share gain over USDT on EU-facing exchanges
• ~20% estimated drop in USDT volume on regulated exchanges versus global venues

The European Securities and Markets Authority has asked the European Commission to bar licensed firms from providing custody and transfer services for stablecoins that fail the bloc’s Markets in Crypto-Assets requirements, not just from listing them for trading, according to reporting by CryptoSlate. The request appears in ESMA’s response to the Commission’s MiCA review consultation, filed Wednesday (September 30, 2026), the deadline the Commission had set for input.

The change would reach existing holders who have stopped trading, not just new buyers. That marks a reversal from ESMA’s own position about twenty months earlier.

ESMA’s September filing would turn delisting into a full service ban

ESMA’s submission asks the Commission to prohibit every licensable crypto-asset service involving stablecoins that fail MiCA’s applicable requirements, replacing the current activity-by-activity approach with a single asset-compliance test. Under MiCA’s Article 3 definitions, custody and transfer are both explicitly listed crypto-asset services alongside trading-platform operation and order execution. Custody covers safekeeping or controlling a client’s crypto-assets or their private keys, while transfer covers moving assets between ledger addresses on a client’s behalf.

ESMA argues the absence of a clear prohibition creates disparities between compliant and noncompliant issuers and opens the door to regulatory arbitrage. Article 82 already sets client-agreement requirements specifically for transfer services, underlining that lawmakers treat the activity as distinct from simple trading. ESMA’s September response does not propose an implementation date, an exception for existing balances, or any wind-down mechanism for providers already holding the affected tokens.

Binance’s 2025 delisting shows what the old rule actually allowed

ESMA’s January 17, 2025 statement drew a line between offering a token to the public or admitting it to trading, and simply holding or moving it for an existing customer. Platforms had to stop making noncompliant tokens available for trading, with acquisition restrictions expected by the end of January 2025 and temporary sell-only services permitted through the end of that quarter, but custody and transfer could continue.

Binance illustrated that distinction in practice. CryptoSlate reported in March 2025 that the exchange planned to remove nine tokens’ trading pairs for European Economic Area users by March 31, 2025, while keeping deposits, withdrawals, conversions and custody available.

Separate research underscores how narrow that earlier shift was. A July 2026 paper by Nicola Borri and Kirill Shakhnov, using CryptoCompare daily pair-volume data from January 1, 2024 through December 7, 2025 across 14 exchanges, estimates that around the April 1, 2025 delisting event USDC’s share of combined USDT-USDC trading rose roughly six percentage points on “regulated-facing” exchanges relative to globally oriented venues such as Binance. The gain came mainly from an estimated 20% drop in USDT volume on those regulated venues, while the change in USDC volume itself was not statistically significant, and aggregate USDC-to-USDT ratios across the full sample stayed nearly flat.

What ESMA’s new text does not say about returning client assets

Existing custody rules under MiCA’s Article 75 require providers to segregate client assets from their own holdings and to return clients’ crypto-assets or their means of access as soon as possible. A European Commission answer relayed through ESMA on February 18, 2026 adds that assets returned must match the type held at the time of a withdrawal request, with conversion into fiat or another crypto-asset only available if the client requests it and the provider holds separate permission for that service.

ESMA’s September submission does not reconcile a blanket custody ban with that return obligation. Section 3.2 of the filing leaves the mechanics of any exit untouched.

The Commission’s consultation page notes that its resulting review report may, if warranted, be followed by a legislative proposal, but no text or timetable has been published. Until then, ESMA’s filing remains a policy submission rather than binding law.

The BlockWest read. Custodians and exchanges serving EU customers should start modeling which stablecoin balances sit outside MiCA compliance today, because a ban with no wind-down clause would force rapid, possibly disorderly exits rather than orderly conversions. Compliant issuers gain a distribution edge in European custody and settlement rails regardless of global trading volumes, which the Borri-Shakhnov data suggest have barely moved.

The next concrete marker is whether the European Commission’s MiCA review report, due after the consultation’s September 30, 2026 close, includes a legislative proposal adopting ESMA’s custody-and-transfer ban, and if so, what exception it carves out for balances providers already hold.

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