Europe’s crypto industry may be heading into a consolidation phase as the focus shifts from winning licenses to paying for life under tougher regulation. CoinDesk reported that the European Union’s Markets in Crypto Assets (MiCA) regime has moved the debate past authorization and toward a harder question: whether smaller crypto firms can absorb the ongoing cost of full regulatory compliance.
That next stage, the report said, may reshape who owns and controls parts of the sector. Instead of being defined by licensing wins, the coming chapter could center on mergers, acquisitions and deeper partnerships between crypto-native companies and established financial institutions.
The same pressure could build in the U.K. Lawyers told CoinDesk that the Financial Conduct Authority’s proposed crypto framework may end up being as demanding as MiCA, even though Britain is taking a different approach. Rather than building a standalone regime for crypto, the U.K. plans to fold crypto activities into the country’s existing financial services architecture.
That distinction matters. Under the U.K. proposal, crypto firms would be subject to the same broad structure that applies to traditional investment firms, including prudential, operational and client asset requirements, instead of operating under a bespoke rule set designed only for digital assets.
U.K. rules could treat crypto firms like traditional financial institutions
Steven Lightstone, a partner at Morgan Lewis’ London office and co-leader of the firm’s global fintech industry team, said the FCA is trying to support competition and help new entrants. At the same time, he said, the bar remains high, especially in areas involving consumers.
“The FCA is trying to help competition, and it really is trying to help newcomers,” Lightstone said. But he added that “it does have very high standards, particularly where consumers are involved.”
Because the proposal relies on existing rules, Lightstone said it will look much less like a separate crypto framework. “A crypto firm will be treated like any normal traditional financial institution,” he said, adding that “it will still be hard to get FCA authorization.”
For banks and investment firms already operating inside that system, the move into crypto may be relatively straightforward. Newer crypto firms, by contrast, may have to build governance, capital and custody systems from scratch, making the burden much heavier.
Client asset requirements may push firms toward deals
CoinDesk said that challenge is especially visible in the FCA’s proposed client asset regime. The plan would apply the Clients Asset Sourcebook, or CASS, framework to crypto businesses. That would require firms to separate customer crypto assets from company funds through trust arrangements and introduce crypto-specific operational safeguards around private keys and reconciliations.
Lightstone described those standards as demanding. “The CASS requirements are very onerous,” he said.
He added that the setup could push new entrants toward combinations with incumbent firms already operating under those rules. “That could encourage those newcomers to merge [with], be acquired by, a traditional firm that’s already subject to CASS and has those controls in place,” Lightstone said.
Banks may benefit as regulatory clarity improves
The consolidation thesis comes as banks themselves appear more willing to enter digital assets as regulatory uncertainty starts to ease.
Simon Schneider, CEO of Sygnum Europe, said the market is still far from saturated. “As of today, there is less than 20% of all the banks in Europe [that] offer today any type of crypto services, so it’s heavily underserved,” he said.
Schneider argued that MiCA’s biggest contribution is not just the creation of new licensing categories, but the legal certainty it gives financial institutions that had long lacked a clear framework.
He pointed to Switzerland as a possible model. After the country introduced distributed ledger technology legislation several years ago, major Swiss banks accelerated their adoption of crypto services. According to Schneider, roughly three-quarters of the country’s leading banks now offer digital asset services. He said Europe could eventually follow a similar path.
Infrastructure providers may remain central
Schneider does not expect banks to fully replace crypto-native firms. Instead, he said banks are more likely to depend on infrastructure providers for custody, brokerage, staking and tokenization services.
Sygnum itself has increasingly focused on supplying regulated digital asset infrastructure to financial institutions rather than competing for retail customers, he said.
“We see a clear tendency towards regulated institutions,” Schneider said. In his view, banks already have client relationships, distribution networks and compliance systems in place. “Banks have the relationships today already, they have the distribution network today, and they have all the compliance regulatory framework in place today.”
He also said assets could migrate toward regulated providers as firms that did not secure MiCA licenses wind down parts of their European operations. Even so, he expects self-custody and institutional custody to continue side by side. “We will remain to have these two concepts,” Schneider said. “But I see a clear tendency towards regulated institutions.”
Scale may matter more in the next phase
As the U.K. moves closer to implementing its own crypto framework, the direction seen across Europe may grow stronger. CoinDesk said Britain’s proposals are meant to encourage innovation, but they also reinforce a broader regional shift: success in crypto may depend not only on technology, but also on the ability to operate like a regulated financial institution.
For an industry built on lean startups challenging incumbents, the next edge may no longer be speed. It may be scale.