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Key Takeaways
- Lawyers say MiCA has shifted the challenge for crypto firms from winning a license to affording the ongoing cost of compliance.
- The U.K.’s proposed FCA framework could fold crypto into existing bank-level rules, pushing firms toward partnerships with established institutions.
- Fewer than one in five European banks currently offer crypto services, but executives expect infrastructure providers and bank partnerships to grow.
Europe’s crypto licensing race under the Markets in Crypto-Assets Regulation (MiCA) is largely finished, according to lawyers and industry executives. The next phase, they say, is different: whether smaller firms can keep affording the compliance costs that come with holding a license. That shift, they argue, could push crypto companies toward mergers, acquisitions, and closer ties with traditional banks.
From Licensing Race To Compliance Burden
MiCA has moved crypto firms past the question of whether they can get licensed and toward whether they can sustain the ongoing cost of operating under full regulatory oversight. Lawyers say that distinction matters because licensing is a one-time hurdle, while compliance is a recurring cost that scales with a firm’s size and complexity.
The U.K. could raise the stakes further. The Financial Conduct Authority’s proposed crypto framework is expected to fold crypto activities into Britain’s existing financial services regime rather than create a standalone regime the way MiCA does. Steven Lightstone, a partner at Morgan Lewis’s London office who co-leads the firm’s global fintech practice, said the approach means crypto firms would face the same prudential, operational, and client-asset rules that apply to traditional investment firms. Lightstone said:
“The FCA is trying to help competition, and it really is trying to help newcomers. But it does have very high standards, particularly where consumers are involved.”
The UK’s Client-Asset Rules Could Push Firms Toward Bank Partners
Lightstone pointed to the FCA’s proposed client-asset regime as a specific pressure point. The plan would apply the existing Client Assets Sourcebook (CASS) framework to crypto firms, requiring them to segregate customer crypto holdings from company funds under trust arrangements, alongside new safeguards around private-key handling and reconciliation. Lightstone also said:
“The CASS requirements are very onerous. That burden could push newer crypto firms toward merging with, or being acquired by, an established institution that already operates under CASS.”
He added that firms built from scratch face the cost of standing up governance, capital, and custody systems that banks already have in place; that gap, in Lightstone’s view, is what could make acquisition more attractive than building compliance infrastructure independently.
This is a forecast from a securities lawyer advising on the sector, not a confirmed regulatory outcome. The FCA’s crypto framework remains a proposal, and its final requirements could still change before implementation.
Banks Are Still Largely On The Sidelines, For Now
Fewer than one in five banks in Europe currently offer any form of crypto service, according to Simon Schneider, chief executive of Sygnum Europe. Schneider argues MiCA’s main contribution isn’t new licensing categories but the legal certainty that has kept many banks from entering the space at all.
He points to Switzerland, where the introduction of distributed ledger technology legislation was followed by a sharp rise in crypto adoption among major banks; Schneider said roughly three-quarters of the country’s leading banks now offer digital-asset services. He expects Europe could eventually follow a similar path, though he stopped short of putting a timeline on it.
Rather than competing directly with crypto-native firms, Schneider expects banks to lean on infrastructure providers for custody, brokerage, staking, and tokenization services, since banks already hold the client relationships and distribution networks crypto-native firms would need to build. Sygnum itself has shifted toward supplying regulated infrastructure to financial institutions rather than competing for retail crypto customers directly. Schneider stated:
“We see a clear tendency towards regulated institutions. Banks have the relationships today already, they have the distribution network today, and they have all the compliance regulatory framework in place today.”
What Consolidation Could Look Like
Schneider expects assets to continue migrating toward regulated providers as firms that failed to secure MiCA licenses scale back their European operations. He does not expect self-custody to disappear, saying the two models are likely to keep coexisting even as institutional providers gain ground.
Taken together, the views from Lightstone and Schneider point toward the same broader dynamic. As the U.K. moves toward finalizing its own framework, the advantage in European crypto markets may shift away from speed and toward the ability to operate at the scale and structure of a regulated financial institution, in their view. That is a directional read from two industry participants rather than a documented market trend, and the pace and shape of any consolidation wave remains unconfirmed.
