Deprecation of Basic authentication in Exchange Online
In September 2021, Microsoft announced that effective October 1, 2022, they will begin disabling Basic authentication for Outlook, EWS, RPS, POP, IMAP, and EAS protocols in Exchange Online.
See full announcement
After that they announced that, effective October 1, 2022, they will begin to permanently disable Basic Auth in all tenants, regardless of usage, with the exception of SMTP Auth.
See the full announcement
So it's clear that Microsoft has no plan to dismiss Basic Authentication on SMTP Auth.
See here, where MS says:
"SMTP AUTH will still be available when Basic authentication is permanently disabled on October 1, 2022. The reason SMTP will still be available is that many multi-function devices such as printers and scanners can't be updated to use modern authentication."
So, right now, it should be possible to maintain Basic Auth active on a single mail address.
Unluckily, Microsoft implemented modern authentication for SMTP on Microsoft365 only through OAuth2 Authorization Code flow, which has been designed for user interactive application.
Instead, UCS apps would need OAuth2 Client Credential flow, which is the proper OAuth2 flow to be used for machine-2-machine modern authentication. Source
Right now, Microsoft has no plan to implement it yet: source.
Using SMTP through the interactive Authorization Code flow is possible, but has meaningful drawbacks: for example, as soon as the authorizing user password expires or gets changed, the authorization is also revoked to the app and authorization procedure needs to be executed again (and being SMTP, the app could even not send an email alarm to notify the issue).
Considered the above situation, as soon as Microsoft will announce basic authentication SMTP dismission, Imagicle will promptly plan to implement an alternative solution to allow customers be prepared in advance (like we already did for BA dismission on POP3/IMAP on O365).
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