Stablecoins: the challenges post-MiCA

Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA) tightly regulates the public offering and admission to trading in the European Union (EU) of stablecoins, a category subdivided into asset-referenced tokens (ARTs) and e-money tokens (EMTs).

From 30 June 2024, issuers of stablecoins, as well as persons offering them to the public or seeking their admission to trading on a platform, will be required to comply with authorisation, good conduct, publication of a white paper, periodic information, commercial communication and internal organisation requirements. Stablecoins offered to the public or admitted to trading in the EU will also have to comply with certain requirements, in particular with regard to the custody of reserve assets, the granting of a right of redemption to their holders and the prohibition on granting interest. Issuers of significant stablecoins have additional obligations. Issuers of EMTs will have to be authorised as credit or electronic money institutions.

It should be noted, however, that issuers of ARTs (other than credit institutions) who issued ARTs in accordance with the applicable law before 30 June 2024 will be able to continue to do so until they are granted or refused authorisation, provided that they have applied for such authorisation before 30 July 2024. However, this additional period is not granted to EMT issuers.

On the other hand, the other provisions of the MiCA Regulation do not apply until 30 December 2024. In particular, it should be noted that crypto-asset service providers (CASPs) operating a trading platform must clearly state in their operating rules that a crypto-asset is not admitted to trading when no white paper concerning it has been published in the cases where MiCA requires this. In other words, from 30 December 2024 a CASP should no longer be able to admit to trading on its platform a stablecoin that does not comply with MiCA requirements. This implies that, in theory, it can still do so until 29 December 2024.

In addition, there are no explicit restrictions on CASPs with regard to other services they may offer in relation to stablecoins that do not comply with MiCA. At the very least, it is conceivable that these CASPs could no longer offer these stablecoins to the public from 30 December 2024. In this respect, an offer to the public consists of any communication to persons in any form, and by any means, presenting sufficient information on the terms of the offer and the crypto-assets to be offered so as to enable prospective holders to decide whether to purchase those crypto-assets. It can be deduced from this that the offer of services on stablecoins that do not comply with MiCA would necessarily be seen as an offer of these stablecoins to the public, except possibly when the service is offered solely to enable the stablecoins to be sold or transferred to a third party, or when it only concerns custody or discretionary portfolio management services.

The market is also awaiting clarifications from the European Banking Authority (EBA) on whether CASPs offering services on EMTs need to be licensed as payment service providers. Some unofficial sources suggest that CASPs will be able to offer custody, transfer, and other crypto-asset services related to EMTs without needing such a license. An official clarification from the EBA will be welcomed, particularly for the intermediate period from 30 June to 30 December 2024, when EMTs will qualify as e-money but MiCA will not yet be applicable.

It should also be noted that MiCA allows Member States to apply a transitional regime for CASPs that provided their services in accordance with the applicable law before 30 December 2024, which will end no later than (and depending on the Member State) 01 July 2026 or on the date of granting or refusal of authorisation of the CASP if earlier. As a result, and subject to what regulators will tolerate, CASPs benefiting from this transitional regime could still offer their services on stablecoins that are not MiCA-compliant until the end of this transitional period; however, it is highly likely that regulators will order them to stop offering these services upstream. In particular, during the transitional period, will CASPs be able to continue to provide crypto-asset services under the old national legal regime or will they have to at least apply the MiCA rules of conduct?

In summary:

• Non-MiCA compliant stablecoins may no longer be offered to the public or admitted to trading in the EU from 30 June 2024.
• ARTs may benefit from a transition period if their issuer has applied for authorisation before 30 July 2024.
• Although, EMTs qualify as e-money from 30 June 2024, CASPs should not need to be licensed as payment service providers (neither as agent nor distributor), but a clarification from the EBA will be welcomed, particularly for the intermediate period from 30 June to 30 December 2024.
• CASPs may continue to offer all their services on non MiCA-compliant stablecoins at least until 29 December 2024, and then possibly for as long as they benefit from the transitional regime applied by the Member States in which they provide their services (subject to what the regulators concerned will tolerate).
• From 30 December 2024 (and unless benefiting from the transitional regime), CASPs may no longer admit to trading on their platform stablecoins that are not MiCA-compliant, nor provide the services of exchange of crypto-assets for funds, exchange of crypto-assets for other crypto-assets, execution of orders, placing, reception and transmission of orders, providing advice on crypto-assets and transferring crypto-assets, unless they only allow or advise on selling positions. In principle, however, they will still be able to offer the custody service for stablecoins that do not comply with MiCA, as well as possibly investing on behalf of their clients in these stablecoins as part of a discretionary management mandate.