Crypto in Financial Services

The Opportunity Ahead

“Web 3.0” is a premise put forward some ten years ago by Gavin Wood, founder of Parity Technologies and co-founder of Ethereum. Web3 is the idea for the next iteration of the internet that relies less on corporate giants such as Microsoft or Amazon and encompasses concepts such as decentralization, blockchain technology, and token-based economics.

Back in around 2017 when cryptocurrency values boomed and started to garner more mainstream attention, the attitude of traditional financial services institutions towards crypto was defensive. Fearful of a disruptor to their field, banks and financial institutions poured scorn over cryptocurrencies and the blockchain technology they are built on. Many real and some perceived dangers and risks were cited, with companies fearful for their profits, while governments worried about unregulated flows of finance. Industry lobbies leapt into overdrive, petitioning governments to legislate against the emerging threat, with mixed success.

This resulted in a diverse regulatory landscape across the globe. Some jurisdictions took a hardline approach to ban crypto outright, while legislative innovators on the opposite end of the spectrum rolled out guidelines or regulations on the issuance and servicing of cryptocurrencies. Irrespective of government actions, the innovative technology refused to go away; on the other hand it gained momentum and started to draw investor funds away from market incumbents.

Meanwhile, companies outside of financial services quietly invested in blockchain technology (though not necessarily cryptocurrencies) seeing it as cheaper, more efficient technology. Forbes lists an annual report of the top 50 companies investing in blockchain, and that for 2023 includes use cases in art galleries, recruitment, compliance and diamonds.

Crypto and Financial Services Converge

Fast forward to 2024, an EU-wide regulation on virtual assets and distributed ledger technology (DLTs) and we are seeing the rapid convergence of crypto and traditional financial services. MiCA was certainly a key factor in driving forward the wider uptake by corporates of crypto since financial services providers, especially in the European Union, operate under stringent regulatory supervision. The prior lack of guidance on how to handle crypto services left many market incumbents with little option but to avoid crypto altogether.

Some innovative firms with a higher risk appetite took the decision to offer crypto services before MiCA was implemented. PayPal allows its users to trade and hold cryptocurrencies on its platform, as well as to use crypto as a means of payment for online shopping. E-Toro was quick to offer users the facility to invest in a range of cryptocurrencies, alongside traditional market instruments.

Visa also partnered with several crypto companies to enable crypto debit cards, while another fintech leader, Block (formerly Square), integrated bitcoin trading into its popular Cash App. The Forbes list mentions many other financial services operators using blockchain and/or crypto in their operations and service delivery.

What Crypto brings to Financial Services

One of the main benefits of both crypto and blockchain for financial services is that they enable faster, cheaper, and more secure transactions across borders and currencies. Web3 can reduce the intermediaries, fees, and delays involved in traditional payment systems, as well as enhance transparency and trust among parties.

Another advantage of crypto and DLT for financial services is that they open up new opportunities for innovation, inclusion, and diversification. Innovators are using crypto and blockchain to create new products and services that cater to the needs and preferences of different segments of customers, such as the underbanked or the unbanked. Financial services providers are also leveraging crypto opportunities to tap into new sources of capital, revenue, and data, as well as hedge against risks and volatility in the traditional financial markets.


A glance at MiCA shows that it favours financial service firms to offer crypto services. Credit institutions and other EU legals entities duly authorised by a national regulator may issue stablecoins (asset-referenced tokens). E-Money tokens may only be issued by credit institutions or electronic money institutions (EMI) similarly authorised within the EU.

Possibly the largest boost MiCA offers the industry, apart from passporting across the EU, is ironically that part that is out of scope of the new legislation. Exempt from the remit of MiCA are virtual assets that represent traditional financial instruments, tokens qualifying as deposits or structured deposits, securitisation positions, insurance policies, and pension and social security schemes. This may herald a trend over the coming months and years that such instruments may all be issued as crypto tokens.

Another piece of legislation is the Crypto-Asset Reporting Framework (CARF) that forms part of the International Standards for Automatic Exchange of Information in Tax Matters developed by the OECD. Extending the Common Reporting Standard (CRS) for financial instruments and asset holdings, CARF provides for the automatic exchange of tax-relevant information on crypto-assets holdings and transactions. A key driver for CARF is that unlike traditional financial products, crypto-assets can be held or transferred “peer-to-peer”, that is without passing through traditional financial intermediaries, such as banks. Information will start to be exchanged under CARF as from 2027.

The Opportunity

The fintech market has already grown exponentially in the last 20 years, driven by technological innovation, consumer demand, and regulatory changes. Global fintech investment reached a record $105.3 billion in 2020, up from $9.4 billion in 2010 and $1.8 billion in 2005. The number of fintech startups also increased from around 100 in 2005 to over 12,000 in 2020, offering a wide range of services such as payments, lending, wealth management, and insurance. Fintech providers have already transformed the financial industry by providing more accessible, efficient, and personalised solutions for both individual customers and businesses.

Tech has progressed from tools that support business to forming the main infrastructure and competitive edge that drives the business, so we now talk not only of Fintech, but of Insurtech and Regtech (Insurance tech and Regulatory tech) as industries in their own right. The evolution is also taking place in other areas such that within a decade all Financial Services firms will likely be Fintechs in their specific market area/s.

Crypto and blockchain are likely to be among the key drivers of growth in Fintech over the next decade and beyond.

Crypto Services in Malta

Having implemented the EU’s first comprehensive legal framework for crypto back in 2018, Malta has attracted crypto operators such as, Bitpanda and FalconX with several other leading names currently in application for authorisation. Private companies holding, trading or staking crypto have also found a stable home in Malta with clear tax guidelines providing certainty over the long term. The EU jurisdiction is well prepared for the imminent rollout of MiCA and is open to serious market operators.