Europe's crypto regulatory landscape is entering a new phase, and industry watchers say the shift could trigger a wave of consolidation as firms struggle with the ongoing cost of compliance. The EU's Markets in Crypto-Assets regulation, known as MiCA, has moved past its initial licensing rollout and is now testing companies on the sustainability of maintaining compliance over time, according to reporting from CoinDesk.
Fewer than 20% of European banks currently offer crypto services, a figure Sygnum Europe CEO Simon Schneider points to as evidence of how much room remains for growth. He contrasted that with Switzerland, where roughly three-quarters of leading banks now offer digital asset services following the country's distributed ledger technology legislation — a model he suggested Europe's broader banking sector could eventually follow.
UK Framework Set to Mirror MiCA's Rigor
The UK's forthcoming crypto framework is expected to impose standards comparable to MiCA, but through a different structural approach: rather than creating a standalone regulatory regime, it folds crypto activities into the country's existing financial services rules. That includes applying the Client Assets Sourcebook, or CASS, which governs how client assets must be protected and requires firms to segregate cryptocurrency holdings from company funds using trust arrangements.
Steven Lightstone, a partner at Morgan Lewis in London, said the UK's Financial Conduct Authority is trying to strike a balance between supporting newcomers and enforcing rigorous consumer protections. “The FCA is trying to help competition, and it really is trying to help newcomers,” Lightstone said, “It does have very high standards, particularly where consumers are involved.” He added that the CASS requirements in particular “are very onerous,” and that the framework will ultimately treat a crypto firm “like any normal traditional financial institution.”
Why Compliance Costs Could Drive Consolidation
For smaller, crypto-native firms, meeting bank-grade compliance standards without bank-grade infrastructure is likely to prove costly. Schneider argued that the direction of travel favors regulated institutions with existing infrastructure. “We see a clear tendency towards regulated institutions,” he said, pointing to banks' established “relationships,” “distribution network,” and “compliance regulatory framework” as advantages crypto-native firms typically lack.
That dynamic points toward two likely outcomes: smaller crypto firms merging with or being acquired by established financial institutions, and crypto-native companies repositioning themselves as infrastructure providers — offering custody, brokerage, staking, or tokenization services to banks rather than competing directly for retail customers. Schneider noted that self-custody and institutional custody are likely to coexist rather than one displacing the other, but success under the new rules will increasingly depend on scale and institutional-grade operations rather than speed to market.
Asset Migration Toward Regulated Providers
As the UK and EU frameworks mature in parallel, industry participants expect a gradual migration of assets and customers toward regulated providers, with unlicensed firms winding down European operations rather than absorbing the cost of compliance. The result, according to the CoinDesk report, is a European crypto sector likely to look increasingly bank-like in the years ahead — a marked shift from the industry's earlier, more fragmented structure.
