TL;DR: EU authorities targeted digital assets on three fronts: ESMA gave MiCA-authorized crypto firms three months to stop serving non-compliant stablecoins, the ECB’s Piero Cipollone warned that delaying the digital euro could weaken monetary sovereignty, and Europol urged the digital currency industry to prepare now for quantum threats to wallets.
Key Takeaways:
- ESMA’s opinion gives MiCA-authorized crypto firms three months to stop services involving non-compliant stablecoins.
- After the deadline, only liquidation, conversion, withdrawal, transfer, or safekeeping of these tokens is allowed, under close supervision.
- ECB board member Piero Cipollone says a delayed digital euro risks weakening Europe’s monetary sovereignty.
- The ECB targets a mid-2027 digital euro pilot and possible issuance in 2029, pending legislation.
- Europol says a powerful quantum computer could derive a private key from an exposed public key and move funds without permission.
- Europol recommends a phased transition to post-quantum cryptography and the prioritization of the most exposed systems.
A busy three days for European Union authorities saw the bloc’s finance watchdog call time on EU-authorized digital asset firms providing services in non-compliant stablecoins, a banking authority board member warn that the lack of a digital euro may pose a threat to monetary sovereignty, and the EU’s law enforcement agency urging early action to protect digital assets from quantum threats.
EU puts time limit on non-compliant stablecoins
The European Union’s top financial markets watchdog has called on EU digital asset firms to stop providing services involving stablecoins that aren’t compliant with the bloc’s Markets in Crypto-Assets (MiCA) regulatory framework, setting a three-month deadline.
On October 8, ESMA published an opinion clarifying its supervisory expectations of crypto-asset service providers involving stablecoins that do not comply with the requirements of the MiCA regulation.
“Crypto-asset service providers (CASPs) authorised under MiCA should cease providing services related to non-MiCA-compliant stablecoins to clients in the European Union,” the EU regulator said. “Any continuation of services should be strictly limited to activities necessary for the liquidation, conversion, withdrawal, transfer or safekeeping of such assets, and should remain time-limited, risk-based, and closely supervised.”
Specifically, ESMA warned that the provision of services to non-MiCA compliant asset-referenced tokens (ART) and e-money tokens (EMT)—the former being stablecoins that purport to maintain a stable value by referencing another value or right, the latter those that purport to maintain a stable value by referencing the value of an official currency—would be considered to expose clients to risks that are inherent to the non-compliant status of stablecoins, due to the absence of the issuer-level safeguards required by MiCA.
Under MiCA, stablecoin issuers must maintain segregated, adequately collateralized reserves, robust governance, risk controls, custody and liquidity arrangements, independent reserve audits, and permanent redemption rights, while issuers of EMTs must also be authorized credit/e-money institutions, maintain 1:1 backing, ensure redemption at par at all times, safeguard funds, and comply with governance, disclosure, complaints, and conflict-of-interest requirements.
ESMA gave MiCA authorized CASPs three months to get in line with the demand, which applies to the full range of crypto-asset services covered by MiCA, including the operation of trading platforms, exchange services, execution of orders, placing of crypto-assets, reception and transmission of orders, investment advice, transfers, custody and administration, and portfolio management, whether these services are provided individually or in combination.
The opinion also called on National Competent Authorities (NCAs)—the relevant regulator of each member state—to ensure that market participants neither maintain, introduce, nor facilitate clients’ access to non-MiCA-compliant stablecoins through their services.
“When NCAs identify remaining pre-existing exposures, they should require their remediation,” said the EU regulator, adding that “NCAs should also ensure that CASPs implement appropriate technical, contractual, and organisational controls to prevent the availability of such tokens in the European Union, including controls preventing clients from acquiring or increasing exposures to those tokens.”
The update builds on ESMA’s January 2025 guidance, which called for restrictions on trading and exchange services that involved non-compliant stablecoins.
As the EU moves to restrict unauthorized stablecoins with one hand, the other hand continues to push the digital euro as an alternative to stablecoins, one that would protect the Eurosystem from the negative effects of a digital economy led by private cryptoassets.
ECB’s digital euro champion warns of weakened monetary sovereignty without CBDC
On October 6, a member of the European Central Bank’s (ECB) executive board, Piero Cipollone, warned that the longer the central bank delays its introduction of a digital euro, the more likely it is that other private entities could provide alternatives, potentially weakening Europe’s “resilience and monetary sovereignty.”
Speaking at an MNI Connect Webcast, Cipollone suggested that without a digital form of cash, the role of public money, i.e., the Euro, may continue to decline, “and we may find ourselves trapped in a situation where there is no pan-European digital payment solution that caters to every type of day-to-day transaction.”
Further, he warned that if tokenized finance develops on closed, incompatible platforms without a safe settlement asset, fragmentation could increase and the singleness of money could be weakened.
“When Europe depends excessively on infrastructures, technologies or solutions controlled elsewhere, our resilience and monetary sovereignty is diminished,” Cipollone said. “The question is how we can ensure that our monetary system continues to preserve the singleness of money, trust and stability, while also supporting efficiency, resilience and autonomy as this transformation unfolds.”
His answer, and that of the ECB, is to extend central bank money into the digital environment with the digital euro, while preserving the two-tier monetary system in which public and private money coexist.
As Chair of the Eurosystem High-Level Task Force on the Digital Euro since 2023, Cipollone has been the driving force behind the digital euro push. In his speech last week, he reiterated previous assertions that the EU needs a digital euro because payments are rapidly becoming digital, while Europe remains dependent on non-European payment infrastructures and technology companies.
Specifically, he argued that the digital euro would provide a Europe-wide legal-tender means of payment usable online and offline, across shops, e-commerce, and person-to-person transactions. Crucially, it would also provide a common infrastructure that European banks and payment providers could build upon, helping them compete with international schemes; currently, two-thirds of euro-area card payments rely on international schemes, while 13 of 21 euro-area countries have no domestic card scheme.
Cipollone also underscored that central-bank money is the “ultimate risk-free settlement asset,” underpinning confidence in commercial bank money because deposits remain convertible into central-bank money at par, ensuring that “one euro has the same value as any other” throughout the euro area.
In his opinion, the digital euro would thus extend this public-money anchor into the digital economy, preserving monetary sovereignty, preventing fragmentation, and ensuring that technological change strengthens rather than undermines Europe’s integrated monetary system.
“The digital euro would give banks access to common standards and a pan-European acceptance network,” Cipollone argued. “It would help them maintain customer relationships, develop value-added services and compete more effectively across borders.”
The EU’s CBDC advocate-in-chief concluded by stating that: “The history of money is one of continuous adaptation. Our task is to preserve what makes money trustworthy as technology evolves. That is the role of central banks in the digital age.”
The ECB has set a date of 2029 for the potential first issuance of the digital euro, with a pilot exercise and initial transactions to be launched in mid-2027. However, for this launch to go ahead, it must still receive legislative backing, which remains in the works—much to the ECB’s frustration.
Nevertheless, progress has been made, and a major milestone was reached in June when the European Parliament’s Economic and Monetary Affairs Committee (ECON) approved its position on the proposed digital euro.
Elsewhere in Europe, while the ECB was busy warning of the monetary sovereignty risk posed by the private digital asset sector, the EU’s top law enforcement agency was highlighting the risk it posed.
Europol warns crypto wallets at risk of quantum attacks
The EU law enforcement agency, Europol, recently published two reports on the security challenges posed by quantum computing, urging organizations, policymakers, and the cryptocurrency industry to begin preparing now.
The reports, released on October 7, examined how future quantum capabilities could particularly undermine the cryptography that protects digital asset wallets and allow attackers to decrypt sensitive information collected years earlier.
The agency admitted that the timing of these capabilities remains uncertain, but cautioned that adapting systems and coordinating security upgrades will take time.
“Regardless of the nature of the threats that may emerge, crypto-agility should be pursued proactively to ensure that systems can withstand and overcome future threats while remaining secure,” said Europol.
Both reports highlighted the need to identify and prioritize threatened assets based on their relevance, and to plan the transition to post-quantum cryptography, focusing on algorithms designed to withstand attacks from both conventional and quantum computers while ensuring interoperability and coexistence with existing cryptographic systems.
The report on the risks to crypto, titled “Quantum Computing and Cryptocurrencies – Bridging technical expertise and decision-making,” was produced by Europol’s European Cybercrime Centre and examined the implications for digital assets, identifying the cryptographic keys used to control cryptocurrency wallets and authorize transactions as the primary point of exposure.
“A sufficiently powerful quantum computer could derive a private key from an exposed public key, potentially allowing an attacker to transfer funds without the owner’s permission,” Europol warned.
To prepare for this threat, the report recommended a phased transition to quantum-resistant cryptography, accompanied by improvements in wallet security and key management.
“For the cryptocurrency ecosystem, preparation requires coordinated work on protocols and wallets, alongside clear information for users about future upgrades and migration requirements,” said the agency. “Coordinating upgrades across decentralised networks will be a particular challenge, making early preparation essential.”
It added that “blockchain developers, wallet providers, policymakers and users all have a role to play.”
Furthermore, both reports recommended that organizations identify where cryptography is used, assess which assets and information need long-term protection, and prioritize the systems most exposed to future quantum attacks.
FAQs:
What did ESMA say about non-MiCA stablecoins?
On October 8, ESMA told MiCA-authorized crypto firms to stop services involving non-compliant stablecoins for EU clients. Any continued activity must be limited to winding down, remain time-limited, and be closely supervised by national regulators.
What is a non-MiCA-compliant stablecoin?
It’s a stablecoin whose issuer doesn’t comply with MiCA’s requirements, including segregated reserves, independent audits, strong governance, and permanent redemption rights. E-money token issuers must also be authorized institutions and back tokens 1:1.
How long do crypto firms have to comply?
ESMA gave MiCA-authorized crypto firms three months. The deadline applies to all MiCA-regulated services, including trading, exchange, custody, transfers, and portfolio management. National regulators must also require firms to fix existing exposures.
Can I still withdraw non-compliant stablecoins in the EU?
Yes, within limits. Firms may still handle liquidation, conversion, withdrawal, transfer, or safekeeping, but only on a time-limited, closely supervised basis. Clients can’t buy or increase exposure to these tokens.
Why does the ECB want a digital euro?
The ECB says Europe relies too heavily on non-European payment infrastructure. A digital euro would offer a legal-tender payment option online and offline, plus shared infrastructure for European banks to compete with international card schemes.
When will the digital euro launch?
The ECB plans a pilot and first transactions in mid-2027, with possible issuance in 2029. Launch still requires EU legislation, which is in progress after a June approval by Parliament’s Economic and Monetary Affairs Committee.
How could quantum computers threaten crypto wallets?
Europol says a sufficiently powerful quantum computer could derive a private key from an exposed public key, letting an attacker move funds without permission. It also warns that stolen encrypted data could be decrypted years later.
What does Europol recommend?
Europol urges a phased move to quantum-resistant cryptography with better wallet security and key management. Organizations should identify where they use cryptography, decide which assets need long-term protection, and prioritize the most exposed systems.
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James Field is a senior writer and researcher specializing in legal and regulatory developments in fintech. During his decade of experience covering the tech, business and legal sectors he has worked as a deputy editor (in charge of Africa coverage) for the market leading Legal 500, written for various global news, industry and B2B outlets (including Legal Business, Geographical Magazine and Dutch News), and reported from tech events, including London Blockchain Conference and UK House of Lords Finance Summits.
