“The crypto industry has been held back by regulatory ambiguity, with a knee on its neck for the last four years. But that's about to change,” declares Michael Higgins, International CEO of Hidden Road, in an interview with Finance Magnates.

The multi-asset prime broker and clearing firm recently secured a license under Markets in Crypto-Assets (MiCA) regulation in the Netherlands, marking a significant step in its strategy to establish regulated infrastructure for institutional crypto trading globally.

Regulatory Balance and Market Evolution

The Hidden Road CEO outlined the company's strategic vision and shared insights on the evolving regulatory landscape for digital assets. The license acquisition positions the firm among just four companies approved under the European Union's comprehensive crypto-asset regulation.

“The goal of MiCA is to provide certainty and clarity in the digital asset space, which today has seen considerable ambiguity between different global regulators,” Higgins, promoted to the role of Hidden Road’s International CEO in November 2024, explained. “This should allow larger financial institutions, who require known, transparent, and certain regulatory oversight, to enter the market.”

The move comes as the EU watchdog ESMA seeks to introduce additional requirements for employees of cryptocurrency firms under MiCA. It had also previously suggested that providers might be required to establish separate legal entities to offer different services in the digital asset sector.

The discussion touched on the delicate balance between innovation and regulation in the crypto space. Higgins emphasized the importance of not forcing traditional finance regulations onto the emerging asset class.

“One of the fears is that you try to shoehorn this new asset class into existing TradFi regulations, which might not be the best idea as it could suppress various trading strategies and underlying blockchain technologies,” he noted.

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Managing Volatility, Risk and Regulatory Landscape

Addressing recent market volatility, Higgins highlighted Hidden Road's risk management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term approach. “As prime brokers, the blow-ups in that space are very rarely from credit blowups but more liquidity blowups,” he said, emphasizing the importance of proper margin management and counterparty credit risk assessment.

The conversation shifted to the changing regulatory landscape in the United States, particularly with new leadership at the SEC and CFTC. Higgins expressed optimism about potential regulatory clarity under the new administration, noting the possibility of merging these regulatory bodies—a previously undisclosed consideration.

Regarding Trump's approach to crypto, Higgins identified key policy changes that could impact the industry.

“The repeal of SAB 121 will allow banks to come in, especially on the custody side,” he stated, adding that the removal of what's known as “Operation Choke Point 2.0” could be the most significant change, potentially ending the de-banking of crypto firms.

SAB 121 was guidance issued by the SEC in 2022 that required financial institutions to report customer-held crypto assets as liabilities on their balance sheets. On January 23, 2025, President Trump signed an executive order on digital financial technology. On the same day, the SEC rescinded SAB 121 through SAB 122, replacing it with a requirement that institutions assess and report liabilities related to safeguarding crypto assets based on existing accounting standards.

The European Union is another concern. MiCA is shaking up the markets, forcing European exchanges to delist non-compliant stablecoins. Among them is Tether, whose future in Europe remains uncertain. This raises questions about the potential impact on a market largely dominated by USDT-based trading.

Institutional Adoption Challenges

The path to institutional adoption faces several critical hurdles, with financial transparency emerging as a primary concern. Higgins points to the resistance of crypto exchanges to provide audited financials as a significant barrier to institutional entry.

“Institutional investors have certain requirements. First and foremost is their fiduciary responsibility to perform KYC and due diligence on counterparties they interact with,” Higgins emphasizes. “In traditional markets, best practice is defined by regular financial transparency according to GAAP and IFRS accounting standards.”

The lack of audited financials from major industry players, particularly offshore exchanges, creates a challenging environment for institutional investors bound by strict compliance requirements. This situation is further complicated by the absence of clear accounting guidelines, creating what Higgins describes as a “chicken and egg” scenario where firms struggle to obtain audits even when willing.

“The winners will be the institutions that conform to more of the requirements in the traditional space,” Higgins predicts, highlighting the importance of regulation, audited financials, and customer protection measures like tri-party segregation.

“This is Not Going Anywhere”

The Finance Magnates interviewee also highlights the growing maturation of the market and acknowledges that “this is not going anywhere,” referring to cryptocurrencies. As an example, he cites figures from one of the derivatives markets.

“Options on IBIT, BlackRock's ETF, on its debut, the market traded 73,000 contracts in the first 60 minutes.” This development, he notes, is crucial as “options tend to do is also dampen the risk to the downside,” indicating a maturing market infrastructure.

Perhaps most intriguingly, Higgins highlights a potential game-changer for the industry: central bank participation. “Central banks holding digital assets is certainly an area of focus,” he revealed, suggesting this “could truly be the inflection point for digital assets as the next investable asset class.”

This observation emerged as one of the key takeaways from the CFC St. Moritz conference, where industry leaders, founders, CEOs, and government officials gathered to discuss the future of digital assets.

“The Future is Global”

Looking ahead to 2025, Hidden Road plans to expand its traditional market offerings while maintaining its focus on regulated, institutional crypto trading. The firm aims to improve the technology behind prime clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term and margin financing, tapping into private market capital for deployment across assets and products.

“We're taking a modern approach, really improving the technology behind prime clearing and margin financing and bringing a new balance sheet, which is really from the private markets, which have been growing over public markets in the last decade,” explained Higgins. “And being able to deploy that capital across large trading institutions, across multiple assets and products.”

When asked about the future balance between retail and institutional investors in crypto, Higgins predicted an evolution similar to other asset classes, with institutional participation eventually surpassing retail, though acknowledging crypto's unique retail origins and ongoing use cases.

“Digital assets will evolve like other asset classes, and over time, institutional participation will be larger than retail,” said Higgins. “However, cryptos started in retail, and they currently dominate.”

The interview concluded with Higgins emphasizing the global nature of institutional crypto demand, noting that while the U.S. market shows promise, its regulatory developments are closely monitored by other major financial centers worldwide.