One of Germany’s leading banks Commerzbank AG (CBK-DE: XETRA) has been granted a crypto custody license by the Federal Financial Supervisory Authority (BaFin), Germany’s financial regulator. Now Commerzbank is officially allowed to provide digital asset services, becoming the first ‘full-service bank’ to receive such a license.
According to Commerzbank, it plans to ‘establish a secure and reliable platform with full regulatory compliance to support its institutional clients by providing custody for crypto assets based on blockchain technology.’
Commerzbank COO Dr Jörg Oliveri del Castillo-Schulz commented:
“Now that we have been granted the license, we have achieved an important milestone. This highlights our ongoing commitment to applying the latest technologies and innovations, and it forms the foundation for supporting our customers in the areas of digital assets.”
Commerzbank applied for a crypto custody business license with BaFin back in April 2022. While it has become the first bank to win approval, it is not the only one interested in providing custody services. Another institution that got the green light is the German stock exchange service provider Boerse Stuttgart Exchange. Back in March, we reported about Boerse Stuttgart obtaining a license and becoming a one-stop shop for service providers ranging from crypto brokerages and trading for institutional investors.
Earlier this year, Deutsche Bank AG (ETR: DBK) also applied for a license with BaFin.
Notably, BaFin is selective in its license approvals. For example, the application of the Binance exchange for a crypto custody license was rejected. According to those familiar with the matter, BaFin’s decision was influenced by concerns over the lack of transparency and regulatory compliance within the exchange’s operations.
Crypto Regulation in Germany
Germany has a unique and rapidly maturing regulatory framework for crypto businesses which is complemented by the general regulations governing. BaFin, which is in charge of Germany’s financial world, is overseeing businesses’ compliance with the existing rules and laws in the country. By now, the majority of activities in the banking sector require a BaFin license. Crypto-related companies are no exception.
In December 2020, German authorities passed a law that enabled financial securities to be held on the blockchain. In other words, issuers/holders became able to document their securities on a blockchain-based register. However, this is so far only applicable to bonds, and not publically traded stocks/shares.
In June 2021, the Electronic Securities Act established digital securities and abolished previously legally mandatory documentation of securities. As a result, the legal basis for the trading of rights through electronic securities appeared, adding a new license category for maintaining a crypto securities register.
So far in 2023, BaFin has completed twice as many application processes for crypto custody licenses as the previous year. This increase in approvals’ number and focus on crypto regulatory activity demonstrates a keen awareness of the need for stronger oversight in a growing market.
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