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Europe’s crypto sector is shifting fast. The cost of compliance with the Markets in Crypto Assets regulation — MiCA — is proving steep enough that many firms are eyeing mergers and acquisitions rather than grinding through the licensing process alone.
It’s not a small pivot. The regulatory burden MiCA places on crypto-native companies is real, and it’s starting to sort winners from losers across the continent. Firms that can’t absorb the costs of building governance frameworks, capital buffers, and custody systems from scratch are running out of road. And some of them are already winding down. As they exit, their assets and clients don’t vanish — they migrate toward whoever holds a valid license and the infrastructure to back it up.
FCA’s Proposed Framework Mirrors MiCA Pressure
In the U.K., the Financial Conduct Authority is moving in a parallel direction. The FCA is drafting a crypto framework that slots into the existing financial services rulebook, basically asking crypto firms to meet the same prudential, operational, and client asset standards that traditional banks already live under. That’s a tall order for a startup that built its stack outside of any regulated environment.
The client asset regime is probably the sharpest edge of what the FCA is proposing. It would require firms to segregate customer crypto holdings from company funds — a rule that sounds simple but demands serious operational infrastructure to execute cleanly. Crypto-specific safeguards on top of that add another layer. For an established bank, it’s kind of an extension of what they already do. For a new entrant, it’s a full build from zero.
And that gap is exactly what’s pushing consolidation. If you can’t build it, you merge with someone who already has it.
Banks Circling, But Slowly
Fewer than 20% of European banks currently offer any crypto services. That’s a wide-open field, and regulatory clarity from MiCA seems to be giving some of those institutions the confidence to finally move. Simon Schneider, CEO of Sygnum Europe, points to Switzerland as a preview of what Europe could look like. In Switzerland, regulatory certainty pushed major banks to adopt crypto services faster than many expected.
Schneider’s read is that European banks won’t necessarily try to build everything themselves. The more likely path, he thinks, is banks leaning on infrastructure providers — specialists in custody, tokenization, and the technical backbone of digital asset services — rather than trying to replicate what crypto-native firms already do well. So it’s not that banks are replacing crypto companies. It’s more that the two sides need each other.
That’s a meaningful shift from the adversarial framing that dominated the early years of the industry. Banks weren’t exactly rushing to embrace crypto when the regulatory picture was murky. Now that MiCA has drawn clearer lines, the calculus is different.
Scale Becomes the New Edge
The crypto industry ran for years on speed and disruption. Agile startups could outmaneuver slower incumbents by moving fast and operating in regulatory gray zones. That era is pretty much over in Europe. Scale — specifically, the scale to absorb compliance costs and sustain operations inside a regulated framework — is becoming the new competitive advantage.
Firms that can’t reach that scale on their own are facing a hard choice: find a partner, find a buyer, or find the exit. Some are already choosing the exit. As they do, regulated providers are positioned to capture the client base and assets those firms leave behind.
On the market side, Binance has held onto a significant share of activity and actually saw net inflows in early July, even as broader market outflows picked up. That kind of resilience probably reflects the advantage that comes with scale and an established compliance posture — exactly what smaller firms are struggling to replicate right now.
The Switzerland model keeps coming up as a reference point. Distributed ledger technology legislation there gave banks a clear legal foundation to work with, and adoption followed. Whether Europe replicates that trajectory depends on how firms and institutions adapt to MiCA’s demands over the next couple of years. Unclear yet whether the pace of consolidation will accelerate sharply or stay gradual.
For crypto firms without the infrastructure to go it alone, the partnership route isn’t just attractive — it’s probably the only realistic option. Traditional banks bring compliance frameworks, distribution networks, and client asset management systems that take years to build. Crypto firms bring the technical expertise and product knowledge that banks can’t easily replicate internally. The math on collaboration is starting to make sense for both sides.
Binance’s net inflows in early July came even as the broader market saw outflows.
Frequently Asked Questions
What does MiCA require from crypto firms operating in Europe?
MiCA requires crypto firms to meet regulatory standards covering governance, capital requirements, custody systems, and client asset management — standards that align closely with those governing traditional financial institutions.
Who is Simon Schneider and what did he say about European crypto adoption?
Simon Schneider is the CEO of Sygnum Europe. He pointed to Switzerland’s experience, where regulatory certainty accelerated crypto adoption among major banks, and suggested Europe could follow a similar path with banks relying on infrastructure providers for custody and tokenization services.
