EU’s New MiCA Rules Could Mean More Crypto Mergers

Europe’s new digital asset regulation could help transform the ownership structure of the cryptocurrency sector.

That’s according to a report Sunday (July 26) by CoinDesk, which says that companies are now facing the cost of doing business under the new Markets in Crypto Assets (MiCA) rules that went into effect at the start of this month. That could lead to more  mergers, acquisitions and partnerships between crypto firms and established financial institutions.

The report added that this trend could extend to Great Britain, where the Financial Conduct Authority’s (FCA) proposed framework for crypto is expected to institute standards similar to MiCA by linking crypto activities with Britain’s existing financial services regulations.

“The FCA is trying to help competition, and it really is trying to help newcomers,” said Steven Lightstone, a partner at Morgan Lewis’ London office and co-leader of the company’s global FinTech industry team. However, he added, “it does have very high standards, particularly where consumers are involved.”

CoinDesk noted that the U.K.’s proposal — unlike MiCA — would integrate crypto companies into the same regulatory standards covering traditional investment firms.

“As it uses existing rules, it’s going to be much less like a standalone framework,” Lightstone said. “A crypto firm will be treated like any normal traditional financial institution,” adding that “it will still be hard to get FCA authorization.”

The report added that the prospect of more consolidation is happening as banks seem more open to embrace crypto amid greater regulatory certainty.

“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,” Syngum Europe CEO Simon Schneider told CoinDesk, arguing that MiCA’s greatest contribution is offering financial institutions the legal certainty they have long been seeking.

In other crypto regulation news, PYMNTS wrote last week about efforts by regulators to offer financial institutions a clearer path to participate in stablecoin usage.

The Federal Reserve has cautioned that stablecoin adoption could alter bank deposits, funding structures and the distribution of credit, that report said, making these instruments strategically important even to banks that haven’t issued their own coins.

“Today, stablecoins are like a drug trying to treat 20 different problems,” Nium Founder and CEO Prajit Nanu said in a recent interview with PYMNTS.

“Where we see a significant amount of opportunity is stablecoin not as a payments value, but as a settlement value,” he added. “Where we think stablecoin has the biggest value as, is a treasury layer across all the entities, where I can move money instantly among my entities.”