Last week the European Securities and Markets Authority (ESMA) issued a statement calling for crypto-asset service providers (CASPs) or crypto exchanges to de-list non-compliant stablecoins (e-money tokens) in an orderly manner, in order to comply with MiCA regulations. This follows considerable discussion in the crypto community about whether EU crypto exchanges must de-list the Tether stablecoin, given Tether has no plans to become MiCAR compliant. Part of the discussion was around the fact that Tether isn’t Euro based and was already listed before MiCAR came into force.
The net effect is that ESMA wants crypto exchanges to stop enabling clients to buy or acquire unauthorized stablecoins such as Tether by the end of January, although it didn’t mention any stablecoin names. Some clients may still hold Tether, and the exchanges have until the end of March to support clients in converting to compliant stablecoins.
In a recent Circle video, Peter Kerstens, the advisor to the European Commission involved in drafting the legislation, said it’s quite simple, “If a crypto-asset is unauthorized, you cannot list it”. He noted that the currency doesn’t matter and seemed dumbfounded about the amount of money spent on reams of legal advice on this topic.
With respect to Mr Kerstens who is often helpful to the crypto community, perhaps it wasn’t that obvious. Because in order to publish the clarifying statement, ESMA itself went to the European Commission and asked them. If ESMA wasn’t sure, why would it be clear to crypto exchanges?
European Commission clarification
The first clause (48) in MiCA that covers e-money tokens (EMTs) says that a person that “make(s) an offer to the public or seek(s) the admission to trading of an e-money token” within the EU must be a bank or an e-money institution and publish a white paper. That’s part of the confusion, because Tether is already listed, so it’s not seeking admission. The same clause adds that others may offer or seek admission for the stablecoin, provide they have the issuer’s consent. Under those circumstances, the issuer must still be a bank or e-money institution.
This is where the European Commission thinks it’s obvious, but others don’t. The Commission told ESMA that a crypto exchange can count as one of the ‘others’ seeking admission on their own initiative. Hence, they need to both have consent and the issuer needs to be a regulated institution. Expanding that interpretation, Tether is not authorized and doesn’t plan to be, so the stablecoin can’t be listed. Additionally, the Commission clarified that this also applies to stablecoins that were already offered or listed before MiCAR came into force.
Large foreign currency stablecoin rules
One other potential point of confusion not mentioned by ESMA relates to rules on de-listing non Euro stablecoins that become too large. However, it’s assumed that the stablecoins are MiCAR compliant in the first place. These rules for foreign currencies are about protecting monetary sovereignty and primarily relate to real world payments, not crypto trading or other investing.
