The race to secure a Markets in Crypto-Assets (MiCA) license might be over, but Europe's landmark crypto regulation is entering a new phase that could reshape the industry's ownership landscape.

Companies are now facing the costs of operating under a full regulatory regime, suggesting the next stage will not be marked by license approvals, but by mergers, acquisitions, and partnerships between crypto-native firms and traditional financial institutions.

This trend could accelerate further in the UK, where the Financial Conduct Authority's (FCA) proposed crypto framework is expected to impose standards comparable to MiCA by bringing crypto activities into the UK's existing financial services system.

Navigating the FCA's High Standards

The FCA is striving to foster competition and is indeed helping new entrants, according to Steven Lightstone, a partner at Morgan Lewis's London office and co-head of the firm's global fintech industry team. However, he added that the agency "has very high standards, particularly when it comes to consumers."

Unlike the EU's standalone MiCA framework, the UK's proposal would place crypto firms under the same regulatory architecture that governs traditional investment firms. This means companies would face familiar prudential, operational, and client asset requirements, rather than a dedicated crypto regulatory system.

"By adopting existing rules, it will be quite different from a standalone framework," Lightstone said. "A crypto company will be treated like a normal, traditional financial institution," he added, noting that "obtaining FCA authorization will still be difficult."

Higher Costs for New Entrants

For traditional banks and investment companies already operating under these rules, adapting to crypto may be relatively straightforward. However, for emerging crypto businesses, the cost of building governance, capital, and custody systems from scratch could increase significantly.

This challenge is particularly evident in the FCA's proposed client asset regime, which applies the Client Assets Sourcebook (CASS) framework. This requires firms to segregate client crypto assets from company funds under trust arrangements, while introducing crypto-specific operational safeguards around private keys and reconciliation.

"CASS rules are very demanding," Lightstone stated. "This could push those new entrants to merge with, or be acquired by, traditional firms that already comply with CASS and have the relevant controls in place."

Banks Embrace Digital Assets

As regulatory uncertainty subsides, banks themselves appear more willing to enter the digital asset space, making the prospect of consolidation more likely.

"As of today, less than 20% of banks in Europe offer any type of crypto service, so there is a severe undersupply in this area," said Simon Schneider, CEO of Sygnum Europe.

Schneider believes MiCA's greatest contribution is not just creating a new licensing category, but providing financial institutions with long-missing legal certainty.

He points to Switzerland as a potential blueprint. After the country introduced distributed ledger technology legislation a few years ago, crypto adoption among major Swiss banks accelerated significantly. Schneider notes that about three-quarters of top Swiss banks now offer digital asset services, a trajectory he believes Europe could follow.

Infrastructure Providers as Key Partners

Banks are more likely to rely on infrastructure providers for custody, brokerage, staking, and tokenization services, rather than completely replacing crypto-native firms. Sygnum itself is increasingly focused on providing regulated digital asset infrastructure to financial institutions, rather than competing for retail clients.

"We see a clear trend of regulated institutions getting involved," Schneider said. "Banks already have existing customer relationships, they have distribution networks, and they have full compliance and regulatory frameworks in place."

The executive also expects that as companies that failed to secure a MiCA license gradually wind down their European operations, assets will shift to regulated service providers. However, he believes self-custody and institutional custody will continue to coexist.

"We will continue to have both concepts," Schneider said. "But I clearly see the regulator's trend."

Scale Over Speed

This trend is likely to intensify as the UK moves closer to implementing its own crypto framework. While the UK's proposals aim to encourage innovation, they also reinforce the broader regulatory direction emerging across Europe: success will depend not only on technological innovation, but also on the ability to operate like a regulated financial institution.

For an industry built on lean startups challenging established players, the next phase of competitive advantage may no longer be speed, but rather scale.