Europe’s Markets in Crypto Assets (MiCA) regulation has moved beyond the race for licenses. The real test now is whether smaller crypto firms can afford to stay independent.
According to reporting by CoinDesk, the continent’s landmark crypto rulebook is reshaping industry ownership structures through a wave of consolidation. As firms grapple with the ongoing cost of comprehensive regulatory compliance, mergers and acquisitions with established financial institutions are emerging as a rational business response—not a failure, but an adaptation to a new competitive reality.
MiCA compliance demands aren’t just bureaucratic hurdles. They require firms to build governance infrastructure, maintain capital reserves, and implement custody systems that established banks already possess. For crypto-native startups, these costs represent a structural disadvantage. For traditional financial institutions, they represent an opportunity.
The Compliance Burden Reshapes Competition
Steven Lightstone, a partner at Morgan Lewis and co-leader of the firm’s global fintech industry team, argues that MiCA has fundamentally altered the competitive equation. “The FCA is trying to help competition,” he said of Britain’s proposed crypto framework, “but it does have very high standards, particularly where consumers are involved.”
The ongoing cost of regulatory compliance has become the real filter. Unlike the initial licensing phase—where crypto firms could celebrate victories—the endurance phase favours incumbents.
The U.K.’s approach intensifies this dynamic. Rather than creating a standalone crypto regime, the Financial Conduct Authority (FCA) is integrating digital asset activities into existing financial services rules. This means crypto firms must comply with client asset requirements, capital standards, and operational safeguards designed for traditional investment firms.
For banks, this integration is straightforward. They already operate under these frameworks. For startups, it means building expensive systems from scratch—or finding a regulated partner.
Client Asset Rules Drive Consolidation
The FCA’s proposed client asset regime exemplifies the compliance burden. Firms must segregate customer crypto holdings from company funds, implement trust arrangements, and introduce crypto-specific operational safeguards around private key management and reconciliations.
“The CASS requirements are very onerous,” Lightstone said. “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.”
This isn’t regulatory theory—it’s structural incentive design. Every firm faces two paths: invest heavily in proprietary compliance infrastructure, or join an organization that has already made that investment. For capital-constrained startups, the math favours consolidation.
Banks Emerge as Primary Beneficiaries
Less than 20% of European banks currently offer crypto services, according to Simon Schneider, CEO of Sygnum Europe. That gap represents both the industry’s current fragmentation and the future consolidation opportunity.
Schneider points to Switzerland as a potential template. Following the introduction of distributed ledger technology legislation several years ago, crypto adoption among Swiss banks accelerated sharply. Today, roughly three-quarters of the country’s major banks offer digital asset services—a trajectory he believes Europe could replicate.
Rather than displacing crypto-native firms entirely, banks are likely to acquire or partner with infrastructure providers for custody, brokerage, staking, and tokenization services. Sygnum itself has shifted focus toward supplying regulated digital asset infrastructure to financial institutions rather than competing for retail customers.
“Banks have the relationships, the distribution network, and the compliance regulatory framework already in place,” Schneider said. That existing advantage is now compounded by regulatory structure.
The Broader Market Implication
MiCA’s real economic impact may not be measured in licenses issued, but in deals completed. As regulatory uncertainty lifts, institutional appetite for crypto exposure is rising. But access—whether through acquisition, partnership, or internal development—requires navigating a compliance infrastructure that only established firms have already built.
For an industry that prided itself on disruption through agility, the next competitive advantage may simply be scale. In a regulated market, incumbents win through structure, not just innovation.