MiCA crypto mergers could rise as EU rules lift compliance costs

The prospect of MiCA crypto mergers is drawing attention after Europe’s new Markets in Crypto Assets regime took effect at the start of this month, increasing the cost of operating in the region, according to CoinDesk. The higher regulatory bar could encourage mergers, acquisitions and partnerships between crypto companies and established financial institutions, the outlet reported Sunday.

MiCA is the European Union’s framework for supervising crypto-asset activity across the bloc. By setting common standards for firms that issue, trade or provide services around digital assets, it gives regulators a clearer rulebook and raises the operational burden for companies that want to serve European customers.

How could MiCA lead to crypto mergers?

Compliance rules can change the economics of a market by increasing the fixed costs that every authorised firm must carry. Smaller crypto businesses may decide that joining with larger peers, selling to a regulated financial institution or entering a partnership is more practical than building the required systems alone.

CoinDesk reported that the same pressure may emerge in Great Britain, where the Financial Conduct Authority has proposed a crypto framework expected to impose standards similar to MiCA by tying digital-asset activity to the country’s existing financial services rulebook.

Steven Lightstone, a partner in Morgan Lewis’s London office and co-leader of the firm’s global FinTech industry team, told CoinDesk that the FCA is seeking to support competition and new entrants. He added that the regulator “does have very high standards, particularly where consumers are involved.”

The British approach differs from MiCA because it would bring crypto companies under rules already used for traditional investment firms, CoinDesk noted. Lightstone said the regime would be “much less like a standalone framework” because it relies on existing rules, and that a crypto business would be treated like a conventional financial institution. He also said FCA authorisation would remain difficult to obtain.

The possibility of consolidation comes as banks appear more willing to consider crypto services when regulation is clearer, according to CoinDesk. Simon Schneider, CEO of Sygnum Europe, told the outlet that fewer than 20% of banks in Europe currently provide any form of crypto service, describing the market as heavily underserved. He said MiCA’s main contribution is the legal certainty financial institutions have been waiting for.

What does this mean for banks and stablecoins?

Regulators are also working to give banks and credit unions a clearer route into stablecoin activity, PYMNTS reported last week. Stablecoins are digital tokens designed to maintain a steady value, often by reference to a fiat currency, and they can be used in payments, settlement or treasury operations.

The Federal Reserve has warned that broader stablecoin use could affect bank deposits, funding models and credit allocation, according to that report. That makes the instruments relevant even for banks that have not issued their own tokens.

Prajit Nanu, founder and CEO of Nium, told PYMNTS that stablecoins are currently being used to address many different problems. He said the stronger opportunity is not payments value but settlement value, particularly as a treasury layer for moving money instantly among entities.

This story draws on original reporting from PYMNTS.