“Because it uses existing rules, it will look much less like a standalone framework,” Lightstone said. “A crypto business will be treated like any normal traditional financial institution,” adding that “obtaining authorization from the FCA will still be difficult.”
For established banks and investment firms already operating under these rules, adapting to crypto can be relatively simple. However, for new crypto businesses, the cost of building governance, capital, and custody systems from scratch could prove much more expensive.
This challenge is particularly evident in the FCA’s proposed client assets regime, implementing the Clients Asset Sourcebook (CASS) framework, which would require firms to separate client crypto assets from firm funds under trust arrangements while introducing crypto-specific operational safeguards around private keys and reconciliations.
“The CASS requirements are very onerous,” Lightstone said. “This could encourage these newcomers to merge [with]be acquired by a traditional company which is already subject to CASS and which has these controls in place.
Bank credit
The prospect of consolidation comes as banks themselves appear more willing to move into digital assets now that regulatory uncertainty is starting to dissipate.
“At present, less than 20% of all banks in Europe [that] offer any type of crypto services today, so they are very underserved,” said Simon Schneider, CEO of Sygnum Europe.
