Historically, our industry has been shaped by two major philosophical currents. On one hand, there’s the belief that crypto should be left untouched, as it operates as a parallel system of value storage and transactions, inherently incompatible with the traditional financial system. On the other hand, there is the argument that regulatory clarity and protections are essential to bring digital assets into the mainstream and safeguard individuals and businesses engaging with crypto.

With the mainstream adoption of crypto—particularly stablecoins gaining momentum—regulators worldwide have increasingly turned their attention to this rapidly evolving asset class. The heightened scrutiny is a response to the 24/7/365 nature of crypto trading, its inherently borderless structure, and the controversies surrounding initiatives like Diem (formerly Libra, Facebook’s stablecoin), bundled together with other industry scandals.

When we look at the current EU and global regulatory efforts, they are the result of a mix of these factors. Fintechs are extremely resilient, efficient, and adaptable by nature, and, well, up until now, we’ve seen how well they have adjusted both nationally and internationally.

With the implementation of MiCA and other countries introducing comprehensive legislative frameworks, such as Turkey, alongside jurisdictions with stringent regulations like the UAE, Canada, and Hong Kong, the legal and administrative burdens on crypto firms are becoming increasingly evident. These developments are already impacting a wide range of companies in the sector and, I’d say, are bound to shape the industry’s future operations.

It becomes crystal clear that only well-funded firms with an impeccable reputation will receive the respective licenses. And this does lead to some unintended consequences when it comes to competition, potentially stifling innovation and creating barriers to entry—for many firms, it is becoming cost-prohibitive. Will we push some crypto startups too far, forcing them to shut down? Will we see larger firms scooping up all the IP and user bases from smaller companies? My guess is we will most definitely see M&A activity picking up in the upcoming quarters.

To offer a stablecoin in the EU, issuers must be registered as an electronic money institution (EMI) or credit institution. In theory, this means we have a large pool of potential issuers that can launch and operate regulated stablecoins, provided they comply with the prudential requirements outlined in MiCA. Stablecoin payments are growing quarterly and, historically, they have become de facto CBDCs—global, almost instant payments at a fraction of the cost—with the key distinction that they are not issued by central banks.

The demand came directly from market needs for settlements, global transactions, and a perfect off-ramp into “stability.” Since the issuers are now strictly regulated, I can expect two things to happen:

a) Market demand will grow for domestic, aka European, stablecoins, but it will remain insignificant compared to the demand for USDC/USDT;

and b) Given there is enough liquidity and intercontinental trade (currently ramping up globally), stablecoins will become an extremely useful tool for individuals and businesses to transact.

Stablecoins solve a real-world problem: international FX payments, which are significantly cheaper and faster than any other TradFi options.

When it comes to the relationship between regulated stablecoin issuers and DeFi, things become much more complex. As a credit institution, for example, the risk appetite and tolerance for true DeFi in many cases simply do not exist. I do not expect any meaningful activity on the DeFi side from regulated entities in the upcoming 18–24 months. How will they directly interact with DeFi? Will they tolerate their client base interacting in LPs on DEXes?

The outlook is that these entities will have to work very closely with regulators to draw the line on what will be tolerated before it can be embraced and adopted.

Interestingly, MiCA and supporting regulations put traditional banks in a very advantageous position. MiCA is like a cousin of MiFID, and currently, banks are under a much heavier regulatory regime—all the “new” requirements covered by MiCA exist, in one way or another, in TradFi.

Moreover, banks possess the necessary resources for compliance, oversight, board governance, and risk management—areas where many crypto firms are increasingly expanding their hiring efforts. I see a growing demand from banks and, especially, brokerages to implement MiCA-compliant blockchain and tech solutions. The reason is straightforward: their clients are driving this demand, and these industry players recognize the massive potential of this asset class.

I would say SaaS to begin with—many TradFi companies will either buy ready-made solutions or acquire companies that provide them. Then we have the whole array of tools needed for transaction monitoring, auditing, reconciliation, and traceability. The market for crypto firms and crypto-tech firms post-MiCA has already expanded massively.

The era of “move fast and break things” is over when it comes to providing regulated services. DeFi can continue to enjoy its rapid expansion and creative technological freedom. The choices will be harder—well-capitalized entities with a solid user base and a very clear product-market fit will greatly benefit from the post-MiCA environment.

Regulations are bringing de facto barriers and friction to the end user. Take the Travel Rule as an example—filling out a questionnaire before sending or receiving a transaction? Not too many users are thrilled by this; however, it is mandated and very much needed to ensure effective AML.

Our task has become more challenging—onboarding users to the volatile environment of crypto assets, which poses its own security risks and ensuring we deliver products that look and feel familiar, are easy to use, and do not deliver an experience that forces users to migrate to platforms that do not require any KYC or AML and are truly non-compliant.

The convergence of digital assets, AI, and compliance technologies is set to transform the financial landscape in a myriad of ways that we can’t fully anticipate yet. As digital assets gain mainstream acceptance, we’re witnessing innovative solutions that blend blockchain technology with traditional financial systems. This fusion is facilitated by advanced payment technologies, tokenization, and cloud-native infrastructures, allowing users to engage with digital assets through familiar platforms like point-of-sale terminals and e-commerce sites.

AI is at the forefront of this fintech revolution. Its integration into financial services is enhancing customer experiences and operational efficiency. For instance, AI-driven solutions are improving customer service and fraud detection, while machine learning algorithms assist financial institutions in making more informed decisions.

As the fintech landscape evolves, compliance technologies are becoming increasingly crucial. With regulatory frameworks becoming more defined, especially in regions like Asia and Europe, we can expect to see a surge in Regtech solutions that leverage AI and machine learning to ensure adherence to complex financial regulations. These compliance technologies will be essential in fostering a secure environment for digital asset trading and DeFi platforms, which are set to experience significant growth.

Take, for example, the following companies: Clausematch, Feedzai (for financial crime), IdentityMind Global (for anti-fraud and risk management), and Trunomi. Regtek Solutions focuses on data automation and validation processes for compliance, and FundRecs provides reconciliation software specifically tailored for the funds industry, addressing the specific regulatory needs of this sector.

In my experience, there are no shortcuts. When companies attempt to cut costs by deploying technology solutions without proper testing and audits, or by neglecting compliance requirements, the end result invariably harms the end user. In the realm of crypto assets, this negligence can lead to financial losses, security threats, or even human suffering. Overlooking AML obligations, for instance, can represent a disregard for the origins of funds, which may stem from fraud, trafficking, or other criminal activities.

I am afraid that regulation has nothing to do with solving friction in underbanked regions. Currently, crypto assets—and especially stablecoins—already solve these problems for individuals and businesses globally. The current batch of crypto-related legislation is coming from regions that don’t have acute problems with payments, so I do not think they will have a tangible positive impact on the large underbanked population.

Cheaper and almost instant stablecoin payments have already solved a real-world problem even before regulations came into force. This is one of the best real use cases where a DLT-based technological application is not just hype but an actual tool to solve at least the initial problem.

From our perspective, it can be argued that embedded finance represents a transformative opportunity to create a seamless connection between financial services and the platforms people already use in their daily lives. In Web3, it’s about meeting users where they are—whether that’s in a messaging app like Telegram, an immersive game, or a decentralized marketplace—and making financial interactions effortless and intuitive.

Embedded finance simplifies the complexities of Web3 by integrating services like payments, loans, or even investments directly into the platforms people use most. For example, we can think of how Telegram bots allow users to send or invest in crypto without ever leaving the app. This trend has the potential to turn messaging apps into financial hubs, blurring the lines between social interaction and digital banking. Similarly, in gaming, players can earn tokens during gameplay and instantly use them to buy items or exchange them for real money, all without navigating external wallets or exchanges. This kind of seamless integration makes Web3 feel less daunting and much more accessible to everyday users.

A particularly interesting trend is how messaging apps are evolving. Apps like Telegram and WhatsApp are increasingly embedding financial tools, allowing users to send money or trade crypto as easily as sending a message. This convenience fosters trust because it happens on platforms users are already familiar with. Gamified finance is another fascinating development, combining financial activities with gaming elements to make earning, saving, or investing more interactive and fun, particularly for younger audiences.

One of the most impactful aspects of embedded finance is its ability to simplify things for users new to Web3. By integrating fiat-to-crypto on-ramps—letting someone use a credit card to buy crypto directly in an app—platforms lower a key barrier to entry. These advancements make digital assets feel like just another part of everyday life—with the underlying tech becoming invisible—whether someone is sending money to a friend, tipping a creator, or purchasing something online.

For users, this evolution feels transformative. They no longer need to learn the intricacies of wallets or navigate unfamiliar exchanges. Everything they need becomes available within platforms they already know and trust.

Altogether, I would argue that embedded finance is about creating a frictionless bridge between traditional finance and decentralized technologies—with the potential to bring digital assets into the mainstream by making them more intuitive, accessible, and practical for everyone. For those of us working in digital banking, it’s an exciting opportunity to shape the future of how people interact with money in a rapidly changing ecosystem.