- The EU crypto industry will consolidate as larger players gain a foothold.
- OKX has opted for Malta to strengthen its EU toehold.
- B2C2, on the other hand, says it's going to Luxembourg to access the funds market.
The EU’s new crypto regulation framework will see larger firms gobble up smaller ones as gaining a foothold in the bloc becomes more straightforward.
The Markets in Crypto-Assets regulation will standardise rules across the EU, easing the entry of large, non-European companies, OKX Europe General Manager Erald Ghoos told DL News.
“Smaller players with licences in Europe know that once MiCA is in place, they won’t be able to compete with larger and more tech advanced players,” Ghoos said.
“So they’re up for sale, they’re looking to be acquired. There will be a lot of consolidation after MiCA.”
Second biggest market
MiCA’s licensing regime will allow companies headquartered in one country to offer their services to the entire EU27.
That means firms must carefully weigh where to settle in order to best access the world’s second biggest crypto market.
The EU accounted for 17.6% — or about $1 trillion — of global crypto transactions between 2022 and 2023, according to Chainalysis.
‘All those licences in some of those countries that have well over 100 crypto registrations — those will disappear’
— Erald Ghoos
Countries like Poland, Czechia, and Lithuania have registers full of smaller businesses and even individuals.
These countries have attracted businesses looking for licences where they believe the licensing process is simpler and regulatory oversight laxer.
Lithuania, for instance, has 588 so-called virtual asset service providers, while Germany — considered a harsher regulatory environment for crypto — has just 22, according to recent data from VASPNet.
“All those licences in some of those countries that have well over 100 crypto registrations — those will disappear” once MiCA is established and businesses are bought or close down, Ghoos said.
Respected hubs
OKX itself was to make Paris its European hub ahead of the rollout of the EU’s crypto assets framework.
Instead, the exchange is going to Malta.
It’s another indication of the dynamics that will rearrange Europe’s competitive map as MiCA kicks in.
Firms like OKX weigh a range of pros and cons in choosing their base.
OKX ultimately deemed Malta more attractive than Paris as the exchange already had a Maltese office, a licence, and a relationship with the local regulator, Ghoos said.
Malta’s existing regime isn’t all that different from MiCA, “so we believe the uplift from our existing licence will be quite light and minimal to reach the new MiCA standards,” he said.
OKX plans to grow its Malta staff from 60 to around 100 to support its European operations, Ghoos said.
He conceded that talent might be harder to find in a smaller country.
Malta has a population of 500,000.
But, he said, Malta “is a nice island in the Mediterranean, it’s very attractive for expats to be here — it’s been easy to convince people to come and join us here.”
Large crypto exchanges have tended to go for big cities like Paris or Dublin, however.
Exchange giant Coinbase, for instance, chose to licence in Dublin, which has a young, educated workforce and already hosts tech titans like Google, Meta, and Apple.
Paris, which has a MiCA-like framework in place already, has also attracted businesses like Circle and Crypto.com.
New markets
For other firms, access to new markets is a draw.
Denzel Walters just moved from London to Luxembourg, to head up an office in the tiny duchy for B2C2.
B2C2, the world’s biggest crypto-native liquidity provider, wants to attract European asset managers, Walters said.
“We’re really excited to see how the fund industry develops,” he said.
Luxembourg is particularly well-positioned in that respect, he said.
Of the EU’s €9 trillion in assets under management in UCITs funds — a popular investment vehicle — €5 trillion is domiciled in Luxembourg.
“Our hope is that as the market develops and takes its first steps into crypto, they partner with B2C2 for over-the-counter liquidity,” Walters said.
The fund industry isn’t yet comfortable with the idea of investing in crypto assets, and neither are its banking partners.
So Walters is also hoping MiCA will help banks feel more secure that B2C2 has good governance and anti-money laundering controls.
Reach out to the author at joanna@dlnews.com.