Regulation
Prepare for M&A in the crypto sector as EU licensing rules are implemented – DL News
- The European crypto industry will consolidate as larger players gain a foothold.
- OKX has chosen Malta to strengthen its anchoring in the EU.
- B2C2, for its part, claims to be going to Luxembourg to access the funds market.
The EU’s new regulatory framework for cryptocurrencies will see big companies gobble up smaller ones as it becomes easier to set up operations in the bloc.
Regulation of crypto-asset markets will level the playing field across the EU, making it easier for large non-EU companies to enter, OKX Europe CEO Erald Ghoos said. New DL.
“Smaller players with licenses in Europe know that once MiCA is in place, they will not be able to compete with larger, more technologically advanced players,” Ghoos said.
“So they are for sale, they are looking to be bought out. There will be a lot of consolidation after MiCA.”
Second largest cryptocurrency market in the world
The MiCA licensing regime will allow companies headquartered in one country to offer their services to the whole of the EU27.
This means companies must carefully assess where to locate in order to better access the world’s second-largest cryptocurrency market.
The EU accounted for 17.6% – or around $1 trillion – of global cryptocurrency transactions between 2022 and 2023, according to String analysis.
“All these licenses in some of these countries that have over 100 crypto records — those will disappear.”
— Erald Ghoos
Countries like Poland, Czech Republicand Lithuania have registers full of small businesses and even individuals.
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These countries have attracted companies seeking licenses from countries where they believe the licensing process is simpler and regulatory oversight more lax.
Lithuania, for example, has 588 virtual asset service providers, while Germany, considered a stricter regulatory environment for cryptocurrencies, has only 22, according to recent data from VASPNet.
“All these licenses in some of these countries that have over 100 crypto registrations – those will disappear” once MiCA is established and companies are bought out or shut down, Ghoos said.
Respected centers
OKX itself was to make Paris its European hub ahead of the rollout of the EU crypto-asset framework.
Instead, the exchange will take place in Malta.
This is a further indication of the dynamics that will reorganise Europe’s competitive map with the entry into force of the MiCA.
Companies like OKX weigh the pros and cons before choosing their base.
OKX ultimately found Malta more attractive than Paris because the exchange already had a Maltese office, a license and a relationship with the local regulator, Ghoos said.
Malta’s current regime is not that different from MiCA’s, “so we believe the improvement over our existing licence will be quite slight and minimal to meet the new MiCA standards,” he said.
OKX plans to increase its staff in Malta from 60 to around 100 people to support its European operations, Ghoos said.
He admitted that talent might be harder to find in a smaller country.
Malta has a population of 500,000.
But, he added, Malta “is a beautiful island in the Mediterranean, it is very attractive to expatriates – it was easy to convince people to come and join us here.”
Large cryptocurrency exchanges, however, tend to gravitate towards big cities like Paris or Dublin.
Exchange giant Coinbase, for example, chose to obtain his degree in Dublin, which has a young, educated workforce and is already home to tech titans like Google, Meta and Apple.
Pariswhich already has a MiCA-like framework, has also attracted companies like Circle and Crypto.com.
New markets
For other companies, access to new markets is an attraction.
Denzel Walters has just moved from London to Luxembourg, to run an office in the tiny duchy for B2C2.
B2C2, the world’s largest crypto-native liquidity provider, is keen to attract European asset managers, Walters said.
“We’re really excited to see how the fund industry evolves,” he said.
Luxembourg is particularly well placed in this regard, he said.
Of the €9 trillion of assets managed by the EU in UCITS funds – a popular investment vehicle – €5 trillion are domiciled in Luxembourg.
“We hope that as the market grows and takes its first steps into crypto, they will partner with B2C2 for OTC liquidity,” Walters said.
The fund industry is not yet comfortable with the idea of investing in crypto assets, and neither are its banking partners.
Walters also hopes that MiCA will help banks feel more secure that B2C2 has good governance and anti-money laundering controls in place.
Contact the author at joanna@dlnews.com.