- Traditional finance is recognising that crypto is more than just investable assets.
- In the EU, fintechs are major competitors for crypto natives.
Stripe has turned up the heat in crypto.
The payment giant’s $1.1 billion acquisition of stablecoin platform Bridge heralds the next stage of crypto’s evolution, which will pit native brands against fintechs, banks, and asset managers.
That’s according to Gillian Lynch, head of Ireland and EU for Cameron and Tyler Winklevoss’s crypto exchange Gemini, who argues the evolution is already palpable in the European Union.
“If I look at my competitors here in the EU, the fintechs are huge competitors, which is probably slightly different from how it is in the States” where crypto natives like Coinbase and Kraken loom larger, Lynch said.
The fintechs are just the beginning, she said, with the big banks next as the EU rolls out regulation that will help large global players enter the market.
Europe rules
The EU’s Markets in Crypto- Assets regulation went live in July, with stablecoin rules first. The parts of the regulation covering service providers like exchanges will kick in at the end of December.
Complying with MiCA’s licencing rules has been “a mammoth task” for Gemini, Lynch said, but that could prove a boon to well-funded companies.
MiCA allows firms that set up operations in one jurisdiction to offer their services to the entire bloc. So those who can afford compliance with the onerous rules can enter the world’s second largest crypto market, accounting for one-fifth of global volume.
Businesspeople at EU crypto exchanges, including Lynch, predict consolidation will ramp up as a result. Larger firms will come into the market, with smaller ones that can’t afford to comply either folding or being bought up.
Fintech land grab
It’s no coincidence that MiCA’s first stage takes aim at stablecoins, and the first landmark deal — Stripe’s — is to integrate with stablecoin capabilities.
That’s seen as an early sign that crypto is gaining mainstream acceptance, being integrated into the financial system, and moving beyond its early use as a store of value, Lynch noted.
“We’ve focused a lot on the investment side [of cryptocurrencies], but we will start to see a lot more focus on crypto as a means of payment, and that’s where stablecoins come into play,” she said.
Large, well-funded players muscling in on the market is a competitive threat to crypto natives — but it also offers opportunities to partner with them also.
Growth path
Gemini has emerged from a difficult period in the US. In February, the company paid a $3.7 million fine and returned some $1.1 billion to customers of its defunct lending programme, Earn.
The exchange wants to grow the institutional side of its business, Lynch said.
Gemini will look to partner with firms on a range of activities. Asset managers will need somewhere to store the crypto they hold and offer to investors, while some banks may need a partner for over-the-counter trading.
Gemini is also interested in targeting private wealth — the services banks provide to high net worth individuals, Lynch said.
That makes sense for a firm headquartered in the tax haven of Ireland, the world’s third biggest hub for investment funds.
As banks will want to provide customers with access to crypto and MiCA providing clear guidance for digital assets in the EU, the stage looks set for this iteration of crypto’s evolution.
“It’s going to be fascinating to see that play out over the next 12 to 24 months,” Lynch said.
Joanna Wright is Regulation Correspondent at DL News. Got a tip? Email at joanna@dlnews.com.