The German financial supervisory authority Bafin has already received more than 40 expressions of interest from banks that would like to obtain a licence for the crypto-custody business in future.
Due to the new money laundering law, banks are no longer restricted to simply offering and safekeeping of classical securities such as shares or bonds, but can also offer crypto-currencies such as bitcoin, ethereum or Ripple as of the new year.
New regulations promote consumer protection and Germany as a business hotspot
The importance of virtual currencies has been growing steadily in recent years. The global market capitalization of digital assets has also been rising steadily again recently. The new measures are now taking place because previous measures were too lax in identifying customers. Thus, the new regulation is set to increase consumer protection. According to the initial draft of the law, cryptographic assets are defined as digital representations of a value that has not been issued or guaranteed by any central bank or public body. The value may not have the same legal status as a currency or money.
With regard to the many expressions of interest, it is stated in government circles that good financial market regulations can also be a location factor. For example, this law, known as the “unique selling proposition”, is intended to ensure, among other things, that more reputable crypto-companies are lured to Germany.
Since 2020 a licence is required for custody operations
The Bafin had pointed out to companies that, since the Money Laundering Act came into force on 1 January 2020, a licence from the Financial Supervisory Authority is required for the crypto-custody business. However, the law accommodates a transitional period until the end of November 2020 for companies that were previously active in this business. For the transitional period, however, registration with the Bafin is required by the end of March.
Frank Schäffler, Member of the Bundestag for the FDP, expressed, in the Handelsblatt, his delight in the strong interest for the licence and pointed to the market growth that had exceeded estimations made by the Federal Ministry of Finance as a motivator for registering. According to Schäffler, the high demand for the licenses shows that companies are increasingly turning to blockchain technology and digital assets.
“Digital assets will fundamentally change financial markets”
Pioneer and one of the first institutions to offer such a service is the Berlin Solarisbank; with the bank establishing the subsidiary Solaris Digital Assets for this purpose. If the application for the custody licence is successful, the Berlin Solarisbank intends to store bitcoin and other virtual currencies on behalf of its customers.
Michael Offermann, the institute’s head of crypto-banking, recently told Handelsblatt that with the revision of the Money Laundering Act, now is a good time to get started. Solarisbank currently holds a full banking licence and wants to enter the future market early. According to Offermann, digital assets will fundamentally change the financial market. He also expects strong growth once the purchase and safekeeping of digital currencies is simplified.
*Originally published in German at CVJ.ch