Recent statements from regulators in the European Union (EU) have clarified that providing custody and facilitating transfers of stablecoins - such as Tether USDT - even when the issuers are not yet MiCA-compliant, are not explicitly banned under the Markets in Crypto-Assets (MiCA) regulation. While EU-regulated crypto-asset service providers (CASPs) may have to restrict trading or new acquisitions of non-compliant stablecoins, the fundamental rights to hold, transfer, and withdraw them remain intact.

This development comes as the European Securities and Markets Authority (ESMA) reiterated that custody and transfer services, in and of themselves, do not amount to an offering or seeking admission to trading of non-compliant stablecoins. As a result, investors can still deposit and withdraw tokens like Tether USDT, provided that EU-licensed entities prioritize compliance and limit new acquisitions of stablecoins whose issuers have not obtained MiCA authorization. The core objective is to ensure consumer protection while giving individuals room to maintain or exit their positions without being completely locked out.

Below, we explore the broader context of MiCA, walking through its timeline, the impact on stablecoins, and the effect on crypto custody. We also discuss how businesses can align with MiCA and how Vaultody is approaching compliance to ensure uninterrupted, secure digital-asset services.

1. MiCA Regulatory Timeline and Key Decisions

MiCA arose due to growing concerns around the rapid expansion of crypto markets, especially regarding initial coin offerings and the emergence of global stablecoin proposals. Over several years, European policymakers sought to fill regulatory gaps, address market abuse, protect investors, and preserve financial stability. Here is a condensed timeline:

• 2018–2019: Early Alerts and Growing Concerns
  The initial push for EU-wide crypto regulation was catalyzed by the ICO boom and multiple high-profile stablecoin initiatives. Regulators focused on forging a robust framework to address market vulnerabilities and potential systemic risk.
• September 2020: European Commission’s MiCA Proposal
  As part of its Digital Finance Package, the European Commission introduced the official MiCA proposal, aiming to unify crypto regulations across the EU and replace the fragmented national laws.
• 2021–2022: Negotiations and Provisional Agreement
  The European Parliament, the Council, and the Commission negotiated the MiCA text extensively, culminating in a provisional agreement that established a comprehensive regime covering both crypto-asset issuance and service provider licensing.
• April 2023: Formal Adoption
  The European Parliament approved MiCA, defining obligations for stablecoins, licensing standards for crypto-asset service providers, and measures to curb market abuse. Certain areas, such as decentralized finance (DeFi) and non-fungible tokens (NFTs), were left for later assessment.
• June 2023: Entry Into Force
  MiCA entered into force, though it set a staggered timeline for implementation to give industry participants time to adapt. ESMA and national regulators began formulating technical standards and guidelines.
• Mid-2024: Stablecoin Rules Become Enforceable
  Stringent stablecoin regulations take effect around mid-2024, reflecting concerns over financial stability and requiring licensed issuers to meet reserve, liquidity, and disclosure obligations.
• End of 2024: Full MiCA Implementation
  By late 2024, all crypto-asset service providers will need to comply with MiCA licensing provisions. National regimes previously overseeing digital assets will phase out, solidifying a single EU-wide standard for the crypto industry.
• 2025–2026: Refinements and Transition Period
  Existing providers under national regulations have until around mid-2026 to secure a MiCA license. Future considerations may include further regulations for DeFi and NFTs.

This phased timeline demonstrates the EU’s step-by-step approach to integrating crypto into a unified regulatory framework. The primary goal is safeguarding investor interests and market stability without stifling innovation.

2. MiCA’s Impact on Stablecoins and Non-Compliant Tokens

Stablecoins are a principal focus under MiCA, split into Asset-Referenced Tokens (ARTs) and E-Money Tokens (EMTs). Both categories must adhere to rules on governance, capital requirements, reserve backing, redemption rights, and more.

• ARTs (Asset-Referenced Tokens)
  Tokens pegged to multiple assets - currencies, commodities, or indices - must be authorized and maintain sufficient reserves to stabilize their value.
• EMTs (E-Money Tokens)
  Tokens referencing a single official currency must follow e-money directives, maintaining robust redemption rights and ensuring full 1:1 backing.

Non-Compliant Stablecoins and Tether USDT

Even when an issuer is not MiCA-compliant, MiCA does not ban simple custody or transfers of such stablecoins within the EU. Authorities expect crypto-asset service providers to stop offering new acquisitions or trading in these tokens, but users can still deposit, hold, and withdraw them. This practical approach allows holders of stablecoins like Tether USDT to maintain continuity in managing their assets, while regulators ensure that issuing practices eventually meet EU standards.

In line with safeguarding monetary sovereignty, MiCA places transaction caps on foreign-currency stablecoins used for payments. This may indirectly encourage the growth of euro-denominated alternatives.

3. Crypto Custody Services Under MiCA

MiCA also establishes rules for crypto custody providers, classifying them as crypto-asset service providers that must secure EU authorization and adhere to strict operational benchmarks.

Key requirements for custodians include:

• Licensing and EU Presence
  Entities must be legally incorporated within an EU member state and meet minimum capital thresholds, with appropriate governance structures in place.
• Segregation of Client Assets
  Custodians must separate client funds from corporate funds, ensuring that customers retain full legal ownership in any insolvency scenario.
• Liability for Asset Loss
  Firms can be held responsible for losses stemming from inadequate security or negligence, reinforcing the importance of state-of-the-art security measures like multi-party computation (MPC).
• Client Agreements and Periodic Reporting
  Clearly defined custody agreements and quarterly statements are mandatory, providing transparency about assets held on behalf of each client.

These requirements are designed to raise professional standards in crypto custody, offering traditional finance-level safeguards to digital asset holders. Greater reliability in custodial arrangements may help bolster institutional and mainstream adoption of crypto.

4. How to Achieve MiCA Compliance: Key Steps for Crypto Businesses

1. Determine CASP Classification
Understand whether your operations - exchange, custody, brokerage, or advisory - fall under MiCA’s definitions for crypto-asset service providers.

2. Apply for Licenses Early
Submit your application for MiCA authorization to a selected EU member state’s regulator. Approved licenses can be passported across the entire bloc.

3. Bolster Internal Governance and Compliance
Implement a strong framework that includes AML/KYC, risk assessments, market abuse prevention, and fit-and-proper management oversight.

4. Review Asset Offerings
Assess which tokens remain viable under MiCA. Restrict trading for non-compliant stablecoins, plan for delistings if necessary, and offer users transparent communication about these shifts.

5. Upgrade Custody Infrastructure
Use robust security solutions that meet MiCA’s requirements for asset protection and reduce the likelihood of breaches or mismanagement.

6. Monitor Regulatory Developments
Stay informed about evolving technical standards, ESMA guidance, and any updates regarding the transition timelines or potential additional rules.

Building a comprehensive compliance program now helps crypto businesses maintain market access and avoid regulatory hurdles as MiCA’s provisions become mandatory.

5. Vaultody’s Approach to MiCA Compliance

Vaultody, an institutional-grade custody solution, has been proactive in aligning its technology and processes with MiCA’s key mandates:

• Regulatory Engagement and Licensing
  Vaultody is pursuing the necessary authorization to operate seamlessly within the EU. The team engages with regulators, ensuring early adoption of any relevant guidelines.
• Security-Focused Infrastructure
  Advanced key-management solutions such as multi-party computation reinforce Vaultody’s commitment to protecting client assets from single points of failure.
• Investor Protection and Transparency
  Clear client agreements and quarterly statements fulfill MiCA’s requirements for disclosures and record-keeping, helping clients stay informed about their holdings.
• Continuous Monitoring and Adaptation
  Vaultody’s dedicated compliance function keeps track of updates to MiCA. This ongoing vigilance ensures operations remain up to date with European directives.

By prioritizing robust security, client-centric policies, and proactive regulatory engagement, Vaultody aims to serve as a reliable partner for businesses looking to maintain uninterrupted custody services in a MiCA-compliant manner.

Conclusion

MiCA is set to reshape Europe’s crypto landscape through a unified regulatory regime. This framework ensures safe and transparent operations, particularly around stablecoins and custodial services. Recent regulatory clarifications make it evident that while certain aspects of stablecoins - like new acquisitions of non-compliant tokens - may face heightened restrictions, custody and transfers of assets such as Tether USDT remain permissible. Investors can still hold their stablecoins, giving them the flexibility to manage or exit positions smoothly.

For crypto businesses, the message is to embrace MiCA’s requirements proactively. Licensing, strict governance, and adherence to investor-protection provisions will not only avert legal challenges but also strengthen consumer trust. Vaultody’s approach highlights the benefits of early compliance preparations - enhanced security, transparent operations, and the ability to serve the EU market with confidence. As MiCA’s phased rollout advances, firms that adapt promptly to its standards can seize new opportunities and foster sustainable growth in Europe’s evolving crypto ecosystem.

Note: This content provides a general overview of MiCA. For specific legal or regulatory advice, consulting qualified professionals is strongly advised.