Posted 1 year ago | by Ben Armstrong
German Regulator BaFin Working With Banks to Register Cryptocurrency Custodians
According to a recent article from Germany's Handelsblatt, 40 banks are seeking to work as custodians for cryptos. The Federal Financial Supervisory Authority (BaFin) is dealing with applications from the banks, which would become regulated cryptocurrency custodians.
New legislation has allowed banks to extend their offerings beyond traditional securities such as stocks and bonds to include cryptocurrencies, like Bitcoin (BTC), Ether (ETH) and XRP since January 2020. New Anti-Money Laundering laws are also coming soon.
BaFin Makes Crypto Work for Banks
Handelsblatt noted that the new legislation gives those institutions that were already engaged in digital assets a transitional period until November of 2020 to complete the registration, and all market participants must register their interest with BaFin by the end of March.
Media reports stated that applications from banks has outstripped the Finance Ministry’s expectations.
A member of parliament for the Free Democratic Party, Frank Schäffler, said:
"The market is growing faster than the Federal Ministry of Finance has predicted. This is a blessing and a curse. The high demand...shows that more and more firms accept blockchain technology, but can also be seen to be a result of the new legislation."
New Crypto Laws for German Banks
The new legislation is included the gamut of crypto assets, which spans from cryptocurrencies to tokens and other kinds of digital assets. They are classified as digital representations of a value that do not have the status of legal tender.
Berlin Solaris Bank, which was established as a crypto-focused business, is reportedly the first institution applying with BaFin.
Michael Offermann, head of crypto banking at Solaris, said:
“We have been dealing intensively with the topic of crypto custody for a year and a half. The new regulation in the new Money Laundering Act is a good time to start practically. After all, we are not a research institute, but a commercial bank.”
The final version of the new laws that allow banks to act as crypto custodians was designed to streamline banks’ cryptocurrency-related operations and facilitate ease of entry to the sector by removing the need for banks to use external cryptocurrency custodians or dedicated subsidiaries.
A major lobbying group representing over 200 financial institutions supported the new legislation, called the Association of German Banks. It argued that supervised banks have sufficient experience and risk mechanisms in place to safeguard client assets.
BitGo, a major digital asset financial services firm, expanded its global reach in early this week by setting up two new regulated custodial entities in Europe, and one of them is located in Germany.