Something quite important is happening in cryptocurrency, and it is easy to miss if you spend too much time watching the price of bitcoin.
For most of crypto's relatively short history, the discussion has been dominated by price. Bitcoin goes up. Bitcoin crashes. Ethereum rallies. Ethereum collapses. Somebody launches another token. Somebody loses a fortune. Somebody else makes one. Regulators complain, exchanges fail, markets recover and the cycle begins again.
That world has not disappeared. Crypto remains volatile and, as the latest market turmoil demonstrates, bitcoin and Ethereum can still behave more like speculative risk assets than money. We have seen plenty of examples where a change in interest-rate expectations, equity markets or global risk appetite sends crypto sharply lower alongside everything else. Indeed, one of the interesting developments of recent years is that crypto has become sufficiently integrated into global markets that it increasingly reacts to the same macroeconomic forces as other financial assets.
But, underneath all of that noise, something much more interesting is happening.
Crypto is becoming finance or, perhaps more accurately, some of the technologies developed by crypto are gradually becoming part of the infrastructure of finance.
There is a big difference.
The original cryptocurrency proposition was essentially that we could create money outside the banking system.
Bitcoin offered a decentralised digital asset with no central bank, no commercial bank and no government controlling its issuance. That remains an extraordinary technological and economic experiment, but it is not necessarily the architecture that will underpin everyday digital finance.
Stablecoins increasingly look like a much stronger candidate.
The reason is obvious.
Most people do not want the money they use to buy lunch with to rise or fall ten per cent between breakfast and dinner. They want £10 to remain roughly £10 and $100 to remain roughly $100. Bitcoin may be digital gold, a speculative asset, a store of value or something else entirely depending upon your perspective, but stablecoins are trying to solve a very different problem. They are trying to make money programmable … and that is where things become interesting.
Regulation is no longer trying to stop crypto. It’s trying to institutionalise it.
One of the clearest signs of maturity is regulation.
For years, the cryptocurrency industry complained that governments would not provide regulatory clarity. Regulators responded that crypto firms were asking for legitimacy without accepting the responsibilities imposed upon banks, payment companies, investment firms and other regulated financial institutions.
That argument is increasingly yesterday's argument.
Europe has MiCA (Markets in Crypto-Assets). The United States has the GENIUS Act (the Guiding and Establishing National Innovation for U.S. Stablecoins Act) framework for stablecoins. Britain has completed important parts of its cryptoasset regulatory architecture, with its fuller regime scheduled to come into force in October 2027. The regulatory question is therefore shifting from should we regulate crypto? towards how do these regulated digital asset systems work together?
That is a profound change.
Crypto wanted to become part of finance and governments are effectively saying: fine, but if you want to become finance, you have to play by financial rules.
Europe is demonstrating what that means.
The end of MiCA's transitional arrangements has produced a brutal shake-out.
Compliance Week reports that fewer than ten per cent of crypto firms operating in the European Union before the July deadline had received authorisation to continue, with an estimated 3,000 firms expected to cease servicing EU clients from within the single market. (Compliance Week)
Another assessment puts the numbers somewhat differently, reporting that around 244 of more than 1,200 firms operating under previous national regimes had secured MiCA authorisation.
Either way, the direction is unmistakable.
Europe is moving from a crypto market where thousands of companies could operate under fragmented national arrangements towards one where fewer firms operate within a much clearer regulatory perimeter.
Some people in crypto will view that as regulatory overkill. Maybe it is. Nevertheless, it is also what happens when an industry grows up.
Banking licences are difficult to obtain. Payment licences are difficult to obtain. Securities businesses are heavily regulated. There are capital requirements, liquidity requirements, governance requirements, anti-money-laundering requirements, reporting requirements and consumer-protection rules.
If cryptocurrency becomes part of mainstream finance, why would we expect it to be different?
The next problem is interoperability
The really interesting question is therefore no longer whether America, Britain and Europe will regulate digital assets. They are doing it. The question is whether those regulatory systems can communicate with each other.
