With the EU's Crypto Asset Market Regulation Act entering the implementation phase, the focus of the European crypto industry is shifting from obtaining licenses to long-term compliance costs. Many lawyers and industry executives believe that as regulatory requirements become more stringent, small and medium-sized crypto companies may be more inclined to seek mergers and acquisitions, or to establish closer partnerships with banks.
The proposed UK framework has a high threshold.
The report points out that the UK Financial Conduct Authority (FCA) is pushing forward a crypto regulatory framework that may be close in strength to MiCA. Unlike the EU, which has established a separate crypto regulatory system, the UK prefers to integrate crypto businesses into its existing financial services regulatory framework.
This means that crypto companies may need to meet similar capital, operational, and customer asset requirements as traditional investment firms in the future, rather than being subject to a separately designed set of crypto rules. Attorney Steven Lightstone stated that the FCA wants to support new entrants, but regulatory standards remain high when it comes to consumers.
CASS demands increased operating costs.
Lightstone notes that the UK plans to extend the Customer Assets Rule (CASS) to the crypto business. Following this approach, companies will need to segregate customer crypto assets from company funds and establish additional controls around private key management and reconciliation. These requirements will be particularly burdensome for new companies.
After the license application process concludes, the real pressure shifts to daily operations. For banks and investment institutions that already have compliance, risk control, and custody systems in place, adding crypto business is relatively easier; however, for emerging crypto companies, building governance, capital, and custody systems from scratch is significantly more costly.
Banks may become the next beneficiaries.
Simon Schneider, CEO of Sygnum Europe, stated that currently, less than 20% of banks in Europe offer crypto services, indicating significant under-market coverage. He believes that the significance of MiCA lies not only in adding a new license category, but more importantly, in providing financial institutions with a long-neglected legal certainty.
Schneider cited Switzerland as an example, noting that the adoption of digital assets by major banks accelerated significantly after the introduction of local legislation related to distributed ledgers, with approximately three-quarters of large banks now offering such services. He predicts a similar trend may emerge in Europe in the future.
He also stated that banks may not completely replace native crypto companies, but are more likely to rely on them for infrastructure services such as custody, brokerage, staking, and tokenization. Meanwhile, companies that fail to obtain a MiCA license and scale back their European operations may see some of their assets transferred to regulated institutions.
