SwanFS Report on October 2025 Regulatory Developments: Potential Impacts on Crypto-Asset Service Provider Business Models

Executive Summary

October 2025 marked a material shift in the regulatory landscape for the crypto-asset industry, moving from high-level principles to binding technical implementation. The fragmented, principles-based guidance of the past has been supplanted by a wave of detailed, binding Regulatory Technical Standards (RTS), supervisory Q&As, and thematic reports. This transition fundamentally alters the operational, prudential, and economic landscape for Crypto-Asset Service Providers (CASPs).

The key impact is a dual-pressure scenario compelling market professionalisation. On the one hand, new EU mandates (MiCA RTS, DORA technical standards, AMLA) are significantly increasing the non-revenue-generating costs of compliance, liquidity management, and operational resilience. The EBA’s opinion on MiCA’s prudential RTS, for example, signals an intent to enforce bank-like liquidity and credit risk standards, directly challenging the composition of stablecoin reserves. This will compress operating margins, force significant capital expenditure on legal and IT infrastructure, and render many high-risk operational frameworks non-viable.

On the other side, regulatory actions in key markets, particularly the UK’s consultation on fund tokenisation (CP 25/28), are creating a formal framework for new, regulated, and potentially vast revenue streams. These opportunities, however, necessitate a strategic pivot from retail-oriented, speculative-grade asset services toward institutional-grade (B2B) services—such as “Tokenisation-as-a-Service” (TaaS)—and deeper integration with traditional financial (TradFi) ecosystems.

The window for regulatory arbitrage has effectively closed; the IOSCO’s thematic review confirmed that implementation of global standards remains “uneven and inconsistent” and is now a key supervisory priority. The dominant trend is a pronounced move towards quality, compliance, and operational scale. October’s developments will accelerate market consolidation, favouring well-capitalised CASPs that can absorb the high cost of compliance and possess the technical expertise to interface with the traditional financial system. Revenue models must now evolve from high-volume, transaction-fee-based retail models to more stable, compliant, and integrated service-based fee structures.

Table 1: Summary of Key October Regulatory Developments and Direct Impacts on CASP Business Models

Regulatory Development	Jurisdiction	Key Provisions	Affected CASP Type(s)	Impact on Business Model & Revenue Generation
ESRB Recommendation on Stablecoins	EU	Recommendation to prohibit “third-country multi-issuer” schemes under MiCA to mitigate run risk.	Global Stablecoin Issuers	Threatens the viability of global, fungible stablecoin models in the EU. Forces costly operational ring-fencing and fragments liquidity.
EBA Opinions on MiCA RTS on Reserve Assets	EU	Rejection of Commission amendments that could permit non-Highly Liquid Financial Instruments (HLFI) in reserves.	Stablecoin Issuers (ARTs & EMTs)	Severely restricts revenue from reserve management, pushing issuers towards a low-margin, fee-based “narrow bank” model.
FCA Consultation on Fund Tokenisation	UK	Proposal of ‘Blueprint’ and ‘Direct to Fund’ (D2F) models to facilitate DLT adoption in asset management.	Asset Managers, DLT Infrastructure Providers, Custodians	Creates significant new B2B revenue streams in fund administration, technology provision, and innovative contract development for the institutional market.
UK AML/CTF Supervisory Reform	UK	Consolidation of AML/CTF supervision for professional services under the Financial Conduct Authority (FCA).	All UK CASPs (especially those structured as legal or accountancy service providers)	Increases compliance costs and supervisory intensity due to the FCA’s sophisticated approach, but provides greater regulatory clarity and a level playing field.
IOSCO Thematic Review on CDA Recommendations	International	Findings of “uneven” implementation of global standards, creating risks of regulatory arbitrage and hindering cross-border cooperation.	Multi-jurisdictional Exchanges & CASPs	Highlights the significant operational risk and high cost of managing a patchwork of differing national compliance regimes.
FCA Update on Consumer Duty for Wholesale Firms	UK	Four-point plan to clarify scope, update client categorisation, and potentially exempt non-UK customers from the Duty.	Institutional-focused CASPs, Prime Brokers, Exchanges	Reduces compliance friction and cost for firms not serving retail clients, making the UK a more attractive hub for wholesale digital asset business.

1. European Union: Implementation, Systemic Risk, and Harmonisation

The EU’s focus in October was on the granular, technical implementation of its landmark MiCA and DORA frameworks, coupled with a more stringent supervisory posture on financial crime, informed by the EBA’s report on ML/TF risks. The objective is clear: harmonise rules to mitigate systemic risk, which translates to elevated operational and prudential burdens for all CASPs operating under the EU passport.

• Impact on Business Model (MiCA & DORA):

  • MiCA Technical Standards (EBA/Op/2025/13 & 14): The EBA’s opinions on the Commission’s amendments to the draft RTS on prudential matters are a critical development. The EBA is vigorously challenging the Commission’s proposed amendments, which it fears would improperly classify all Money Market Funds (MMFs) as ‘highly liquid financial instruments’ (HLFI) and relax concentration limits. The EBA argues this is inconsistent with MiCA Articles 36(1)(b) and 38(1), as it could permit stablecoin reserves to be invested in non-HLFI assets, including commodities or other crypto-assets, introducing material liquidity and credit risk. Impact: CASPs (especially stablecoin issuers) must now model for the stricter EBA-preferred interpretation, which mandates a bank-like treasury and risk management function, severely constraining the business model to that of a low-margin financial utility.

  • Operational Resilience (DORA): ESMA and the EBA designating “cyber risk and digital resilience” as a key 2026 priority moves DORA from a principles-based text to a primary supervisory focus. This is reinforced by the finalisation of the joint draft RTS (JC 2023, 83-86), which specifies the exact requirements for the five key pillars: ICT Risk Management, Incident Management & Reporting, Resilience Testing (including Threat-Led Penetration Testing), Third-Party Risk Management (TPRM), and Information Sharing. Impact: Business models reliant on a patchwork of non-DORA-compliant third-party cloud or data vendors are now at high risk. CASPs must make immediate, significant capital expenditures to:

    1. Create and maintain the new mandatory “register of information” for all ICT contractual arrangements.

    2. Renegotiate all critical vendor contracts to include DORA-mandated clauses.

    3. Fund and execute advanced, scenario-based Threat-Led Penetration Testing (TLPT).

  • ESMA Q&As (Q&A 2653 & 2654): These new Q&As eliminate key areas of ambiguity. Q&A 2653 provides a technical distinction between “exchange of crypto-assets for funds” (where the CASP acts as principal/counterparty) and “execution of orders” (where the CASP acts as agent). Impact: This distinction is critical for prudential categorisation. Operating as a principal will invite significantly higher capital requirements. Q&A 2654 clarifies the transitional regime for “legacy tokens” (admitted to trading before December 30, 2024). While offerors do not need to produce a new white paper, trading platform operators must ensure a compliant white paper is drawn up, notified, and published by 31 December 2027. This places the liability and cost burden directly on the exchanges, forcing them to conduct due diligence and potentially delist non-compliant assets.

• Impact on Revenue Generation (MiCA & FinCrime):

  • Squeezed Stablecoin Revenue: The EBA’s hard-line stance on reserve composition will materially compress the profitability of stablecoin issuance. The primary revenue model—arbitrage the yield curve via reserve assets (i.e., “float”)—will be significantly constrained by rules mandating the holding of low-risk, highly liquid, and diversified assets, effectively eliminating high-yield strategies.

  • Increased  Compliance Cost Centre: The EBA’s report on tackling ML/TF risks explicitly identifies methods used by firms to evade supervision, such as forum shopping, complex beneficial ownership structures, and the misuse of reverse solicitation. The report positions the new, harmonised AMLA/MiCA framework as the direct countermeasure. Impact: CASPs must now budget for a permanent, significant increase in operating costs to fund sophisticated, cross-border transaction monitoring, enhanced due diligence (EDD) systems, and skilled compliance personnel capable of satisfying the central oversight requirements of AMLA. This is no longer a variable cost but a fixed, non-negotiable cost of licensure.

2. United Kingdom: Proportionality and Innovation

The UK’s approach in October (CP 25/28) presents a nuanced strategic divergence from the EU, striking a balance between stringent consumer protection and facilitating market innovation. The impacts are twofold: a direct challenge to the profitability of existing retail-facing models through the Consumer Duty, and a regulator-defined pathway for creating new institutional revenue streams via tokenisation.

• Impact on Business Model (Tokenisation & AI):

  • New B2B Business Model (CP 25/28): The FCA’s consultation on progressing fund tokenisation is the most significant enabling development. It provides a “Blueprint” model, a “stage one” approach focused on using DLT for a fund’s unitholder register, which is compatible with the existing UK legal framework (e.g., the COLL sourcebook). Crucially, it also proposes a new “direct-to-fund” (D2F) dealing model, which would disintermediate the traditional “manager’s box” model. Impact: This creates a formal framework for CASPs to pivot their business model. Instead of listing speculative assets, firms can now develop institutional-grade “Tokenisation-as-a-Service” (TaaS) platforms, “DLT-registrar” services, and custody solutions for traditional asset managers. The BoE’s parallel work on AI and DLT substantiates this pivot, signalling market confidence.

  • Operational Pivot: Firms wishing to pursue this model must build new operational capabilities, including:

    1. Permissioned DLT infrastructure that can interface with traditional finance.

    2. Smart contract auditing and management capabilities.

    3. AML/KYC controls are sufficient to ensure that asset managers are satisfied that all participants on the DLT register are compliant.

• Impact on Revenue Generation (Consumer Duty & Tokenisation):

  • Pressure on Retail Revenue: The FCA’s continued focus on the Consumer Duty (including its application to wholesale firms) exerts significant downward pressure on high-margin, retail-facing revenue. Business models reliant on high trading fees, wide spreads, or behaviourally driven (“gamified”) interfaces will struggle to evidence compliance with the “fair value” outcome, likely leading to fee compression.

  • New B2B Revenue Streams: The fund tokenisation consultation directly facilitates new, more stable revenue models. The FCA’s own cost-benefit analysis estimates a net present value benefit of £27m-£57m over ten years from the D2F model alone, primarily from reduced administrative costs. Impact: CASPs can generate stable, recurring, service-based fee income from:

    1. Tokenisation Fees: Charging asset managers for the creation and issuance of on-chain fund units.

    2. Platform & Custody Fees: Providing the underlying DLT infrastructure, innovative contract management, and digital asset custody.

    3. Advisory & Servicing: Consulting on innovative contract development, DLT integration, and regulatory compliance.

3. International Developments and Global Trends

Internationally, the focus was on establishing a harmonised global regulatory baseline, with stablecoins as the primary target. This trend, combined with forward-looking analyses, portends the end of high-risk, unregulated yield products and the inception of a new wave of integrated “AI+DLT” services.

• Impact on Business Model (Stablecoins):

  • Global Stablecoin Crackdown: The IOSCO thematic review’s finding that global implementation is “incomplete, uneven and inconsistent” is a direct mandate to national supervisors to close these gaps and end regulatory arbitrage. This is reinforced by the ESRB’s report on systemic risks, which specifically identified “multi-issuer” stablecoin schemes (involving joint EU and non-EU entities) that fall outside the scope of MiCA. These schemes create contagion risks (e.g., a run on the non-EU entity draining the EU entity’s reserves). Impact: CASPs can no longer rely on jurisdictional arbitrage. Business models built on offering non-compliant stablecoins (such as Tether, as cited by the ESRB) or utilising complex cross-jurisdictional structures will be subject to intense supervisory scrutiny and enforcement.

  • “Yield-Bearing” Products Banned: The FSI Brief’s focus on “stablecoin-related yields” is a direct challenge to a core product for many CASPs and DeFi protocols. Regulators view these as high-risk investment products (akin to deposits or MMFs) being offered without the requisite prudential safeguards. Impact: This will force CASPs to shutter or heavily restrict these popular products for retail users, which were a primary mechanism for user acquisition and capital aggregation.

• Impact on Revenue Generation (Stablecoins & AI/DLT):

  • Elimination of a Key Revenue Driver: For many CASPs, offering “yield” or “earn” products on stablecoins was a significant revenue vector (via net interest margin (NIM) or equivalent spread). The global regulatory prohibition of these products for retail users will eliminate this high-margin revenue stream and increase customer acquisition costs.

  • The Next Frontier (AI+DLT): The Clifford Chance & Deutsche Bank paper, much like the BoE’s, delineates the next frontier for high-value service models. The convergence of AI and DLT opens up new, high-margin service lines for sophisticated CASPs. Impact: This creates a new B2B revenue opportunity in providing:

    1. AI-Verified Smart Contracts: Offering services to audit and validate smart contracts for security and efficiency.

    2. AI-Powered Oracles: Developing more robust and secure on-chain data feeds for DeFi and tokenised assets.

    3. Intelligent Treasury Management: Creating autonomous, on-chain protocols for managing corporate treasuries.

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