Crypto Industry M&A: Europe's Strict Rules May Trigger a Wave of Deals in the Crypto Sector

M&A in the crypto industry is coming to the forefront as Europe launches MiCA, while the UK finalizes its own regulations for the cryptocurrency market. The new reality is simple: obtaining a license is no longer enough; companies now need to spend years on compliance, risk management, customer protection, and operational infrastructure. Similar pressure is evident in North America, where stricter requirements in the US and Canada are also pushing companies towards partnerships, asset sales, or seeking larger owners.

• MiCA is already transitioning European crypto asset regulation from a race for licenses to a phase of costly ongoing compliance.
• Lawyers believe that the British model may prove to be equally stringent: crypto companies will be integrated into existing financial services regulations rather than being placed in a separate regime.
• Banks and large financial groups have an advantage because they already possess control systems, capital, compliance, and experience in managing client assets.

After MiCA, the Market Enters a Consolidation Phase

The European MiCA regime has become a significant milestone for the crypto industry, but the main question now is not who was first to obtain licenses. Much more important is whether small crypto companies can withstand the costs of operating in a fully regulated environment.

The shift to ongoing supervision changes the balance of power. Startups that previously thrived on speed and niche specialization are now forced to juggle several costly areas at once:

• Legal team expenses.
• Implementation of internal procedures.
• Risk management.
• Reporting.
• Asset custody.
• User protection.

For some players, this may prompt them to seek a buyer, partner, or merge with larger entities.

The more expensive ongoing compliance becomes, the stronger the market moves towards consolidation: licenses, capital, and ready infrastructure turn into key arguments for M&A.

This is why mergers and acquisitions in the crypto sector may become a natural continuation of regulation. The higher the entry threshold, the more scale, capital, and ready infrastructure are valued.

In the international agenda, such deals are increasingly assessed through several practical factors:

• Regulation and finance: asset status, investor protection, lending rules, payment, and currency operation regulations directly influence M&A structure.
• Digital assets: digital currencies, stablecoins, Bitcoin, and Ethereum are crucial for understanding how assets fit into banking processes.
• Regional context: for companies operating between Europe, the US, and US dollar markets, asset price and volatility are important.
• Infrastructure: blockchain technology and decentralization directly impact custodial and settlement models.
• Market benchmarks: Coinbase as a major crypto exchange and Stripe, Inc. as a payment technology company often find themselves alongside banks in discussions about infrastructure.

Who Often Becomes the Target of M&A

Potential targets for deals are increasingly companies that already possess what is difficult and expensive to build from scratch:

• Crypto exchanges with a customer base and operational trading processes.
• Custodial services capable of storing digital assets and managing private keys.
• Infrastructure providers for banks, brokers, and payment companies.
• Startups with licenses or nearly complete regulatory frameworks.

The attractiveness of such targets usually hinges on several factors: licenses, technological infrastructure, customer base, compliance, and the ability to quickly integrate into the buyer's processes.

• Acquiring a company entirely if the buyer needs the team, licenses, and clients.
• Purchasing individual assets when the technology, client portfolio, or infrastructure is of interest.
• Strategic investments if a major player wants to access the market without full control.
• Merging when companies combine resources to withstand regulatory costs and scale.

Asset Valuation and Risk Assessment

In deals involving digital assets, the target's price depends not only on revenue or the number of clients. The properties of the assets themselves are also important:

• Liquidity: how quickly an asset can be sold or utilized without significantly affecting its price.
• Volatility: how sharply the asset's value changes.
• Legal status: how the asset is classified in the relevant jurisdiction.
• Technological security: how reliable wallets, smart contracts, and internal infrastructure are.
• Transparency of asset origin: whether it can be verified that the assets are not linked to prohibited operations.

For tokens, stablecoins, and other digital assets, the liquidity, legal status, and technological model are examined separately to see how they affect the future deal.

Assessing such a target is almost always more complex than standard financial due diligence:

• The origin of digital assets and transaction history must be verified.
• It is important to understand how to integrate the buyer's IT infrastructure with that of the target.
• A separate risk is associated with the storage of private keys and access to wallets.
• When transferring assets, compliance, AML/KYC, and sanctions restrictions must be reassessed.
• Legal due diligence must consider the transfer of digital assets, rights to blockchain technologies, disclosure, and intellectual property.

The British Approach May Raise the Bar Even Higher

The UK is preparing its own crypto regulatory framework through the FCA. It is expected to be comparable in strictness to MiCA but structured differently: cryptocurrency activities must be integrated into the existing financial services regulatory system.

This is an important distinction. In the European Union, MiCA creates a separate regime for the crypto asset market. In the British model, crypto companies will essentially operate within the same architecture as traditional investment firms. This means requirements for capital, operations, management, client assets, and risk control.

The FCA wants to maintain competition and is genuinely trying to help new market participants. But the regulator's standards are very high, especially regarding consumer protection, noted Stephen Lightstone, a partner at Morgan Lewis's London office and co-head of the firm's global fintech practice.

According to Stephen Lightstone, utilizing existing rules will make the British regime less like a separate cryptocurrency framework. A crypto company will be treated almost like a regular financial organization, and obtaining FCA approval will still be a challenging task.

For banks and investment firms that have long operated under such conditions, adapting to crypto services may be relatively straightforward. They already have compliance departments, control procedures, and experience interacting with regulators. However, new crypto players will have to build all of this from almost scratch.

Client Assets Become the Main Challenge

One of the most complex elements of the British regime may be the FCA's approach to the custody of client assets. This involves applying CASS rules, which require separating client assets from the company's own funds and formalizing such relationships through trust structures.

For the crypto market, there are additional specifics:

• Control of private keys.
• Reconciliations.
• Operational security.
• Procedures for digital assets.

This is not just a formality, but a full-fledged infrastructure that needs to be maintained daily.

The requirements of CASS are extremely heavy. They can push new participants to merge with a traditional company that already complies with these rules and has the necessary control mechanisms, says Steven Lightstone.

Such a scenario seems logical. If a small crypto company cannot quickly and cheaply build the entire set of processes, it is easier for it to become part of a financial group or enter into a partnership with a player that already has licenses, capital, and proven procedures.

Banks are increasingly looking at digital assets

Consolidation may accelerate also because banks themselves have become more comfortable with digital assets. The less regulatory uncertainty there is, the easier it is for financial institutions to launch products related to cryptocurrencies.

Today, less than 20% of European banks offer any crypto services. This means that the market is still significantly underdeveloped, said Simon Schneider, CEO of Sygnum Europe.

Simon Schneider believes that the main significance of MiCA is not only in the new types of licenses. More importantly, it is the legal certainty that banks have long lacked. When the rules are clear, large financial organizations are more willing to invest in infrastructure and offer services to clients.

As a benchmark, he cites Switzerland. After the adoption of legislation on distributed ledger technology, the interest of large banks in crypto services has noticeably increased. Currently, according to Simon Schneider, about three-quarters of the leading banks in the country already offer services related to digital assets. He admits that Europe may eventually follow a similar path.

At the same time, banks are unlikely to completely displace crypto-oriented companies. A more likely scenario is that financial groups will rely on infrastructure providers to launch several directions:

• Custody.
• Brokerage services.
• Staking.
• Tokenization.

Sygnum Europe itself is increasingly focusing on regulated infrastructure for financial institutions rather than directly competing for retail clients.

We see a clear shift towards regulated organizations. Banks already have business connections, distribution channels, as well as all the regulatory and compliance infrastructure, said Simon Schneider.

He also expects that some assets will flow to regulated providers as companies without MiCA licenses reduce their activities in Europe. At the same time, self-custody and institutional custodial solutions, in his opinion, will continue to exist in parallel.

Cryptocurrencies in Corporate Strategies

Bitcoin, Ethereum, stablecoins, and other digital assets can influence M&A not only as a regulatory object. They can also be used in settlements between companies, be part of treasury strategy, and serve as a tool for asset diversification.

If the target company has significant crypto assets, the buyer assesses their liquidity, volatility, legal status, and security of storage. Such a portfolio can increase the attractiveness of the target, but at the same time complicates verification, integration, and transfer of assets after the deal.

Consolidation also changes the distribution of liquidity. The more assets and clients move to regulated providers, the stronger the role of large players grows. For users, this may mean broader access to services through banks and financial groups, but it becomes harder for small companies to compete without licenses, capital, and reliable infrastructure.

Scale may become a new advantage

British regulations, if implemented in the current logic, will strengthen the pan-European trend: the success of crypto companies increasingly depends not only on technology but also on their ability to operate as a regulated financial institution.

For an industry that has grown on the idea of fast startups challenging major players, this is a serious turn. In the new competitive environment, it may not be the one who launches a product faster that wins, but rather the one who can withstand costs, scrutiny, capital requirements, and constant oversight.

This is why the next wave of deals in the crypto industry may not be coincidental, but structural. Strict regulation increases the price of independence, meaning that partnerships, acquisitions, and mergers with banks become not just a backup option for many companies, but a way to stay in the market.