“Because it utilizes existing regulations, it will function less as a standalone framework,” Lightstone noted. “Crypto firms will be treated similarly to traditional financial institutions,” they added, noting that “obtaining FCA authorization will remain a significant challenge.”
For established banks and investment firms already operating under these frameworks, integrating crypto assets may be relatively seamless. Conversely, for emerging crypto enterprises, the expenses associated with developing governance, capital, and custody infrastructure from the ground up could prove significantly more taxing.
This difficulty is especially apparent in the FCA’s proposed client asset regime, which would implement the Clients Asset Sourcebook (CASS) framework. This would mandate that firms segregate customer crypto assets from corporate funds via trust arrangements, while simultaneously introducing crypto-specific operational protections for private keys and reconciliations.
“The CASS requirements are quite demanding,” Lightstone remarked. “This could incentivize newcomers to merge with, or be acquired by, traditional firms that are already compliant with CASS and have established these controls.”
Banking Integration
This trend toward consolidation arrives as banks show an increased willingness to engage with digital assets, now that regulatory uncertainty is beginning to subside.
“Currently, fewer than 20% of European banks offer any form of crypto services, leaving the sector heavily underserved,” stated Simon Schneider, CEO of Sygnum Europe.
