Germany’s Crypto Custody Law Faces a Problem: New Companies Can’t Get a Bank Account | Instant News

While more than 40 banks have reportedly expressing interest in Germany’s new crypto containment license, the companies may still have to face anti-crypto sentiment among German banks.

“If you try to open a bank account for the company there, you work with the bank’s institutional banking branch,” said Stijn Vander Straeten, CEO of Crypto Storage AG.

German bankers don’t want to take risks, and crypto companies don’t make money asking for account checks.

In November, Swiss-based Crypto Storage AG, a subsidiary of Crypto Finance AG, opened a German branch in central Frankfurt called Crypto Storage Deutschland GMBH so that it could be eligible to apply for a license. About 15 banks rejected Crypto Storage Deutschland before finding the current bank, Straeten said. Banks that ultimately accept Crypto Storage as customers must first be convinced to take accounts by Sven Hildebrandt, head of the DLC consulting firm.

“We get calls from various places [crypto] company that wants to go to the German market and be regulated. Many of them have this problem, “said Matthias Winter, partner at Eversheds Sutherland Germany, a company that works directly with German regulators on how the law should be enforced. “There is no legal reason why banks don’t offer bank accounts but they are doubtful because they don’t understand business.”

While many banks with guard services in Germany have talked about the law in the German press, the only bank that has announced an intention to submit a legal application is a technology-focused service provider such as SolarisBank, which opened digital asset units in December 2019 to anticipate the entry into force of the law.

In a report that came out earlier this year, Head of Germany’s BNP Paribas Securities Services Agency and Austria Thorsten Gommel said he wanted the bank to continue to lead in custody, including custody of digital assets.

When CoinDesk reached BNP Paribas, the bank changed its tone.

“As a leading global guardian, safeguarding and storing digital assets is a topic that we follow closely,” said BNP Paribas spokeswoman Caroline Lumley. “We are exploring what services can be developed for digital assets associated with tokenized economies, with a focus solely on regulated assets.”

In early March, Deutschland Crypto Storage notified the German Federal Financial Supervisory Authority (BaFin) that they planned to apply for a crypto prisoner license. Currently it also recruits four to six full-time employees for branches, including compliance specialists from the banking industry and “fit and proper” CEOs in BaFin’s eyes.

Crypto Storage AG also works on a white labeled deposit solution where the company can hold for banks and other startups who want to hold crypto in Germany but also do not want to set up branches in Germany (in terms of startup) or take resources from traditional business lines (in the case of bank). This application will cost up to 2 million euros.

Crypto banking is not yet feasible

Meanwhile, crypto companies and institutions still have a lot of uncertainties related to the submission of crypto storage licenses that will be clarified by BaFin over time.

The industry does not know exactly what types of activities will qualify as crypto prisoners, said Daniel Resas, a partner associated with Schnittker Möllmann Partners in Hamburg, a company that advises banks about blockchain projects.

The crypto exchange can easily be counted as a crypto keeper, but if the company’s business model includes risking or inserting digital assets into smart contracts for a limited period of time, it is not clear whether it will be considered a crypto containment under current German law, said.

Crypto did get clarification in early March with BaFin’s guidance said that the crypto company would be considered a guardian if they had access to a customer’s private key. This might rule out technology providers who only see encrypted private key versions, but how they affect them multi-party calculation The company isn’t sure, Winter said.

In early April, BaFin too release additional details about what IT and security should be for companies that are interested in applying and the level of expertise that the director must have.

“It’s not unusual that BaFin will issue a guide like this,” Winter said. “Because they talk to technology companies, they change the way they communicate. If there are changes to the law for classical banking, they will not provide guidance because banks have a large legal department.”

While BaFin has published applications that are not binding for companies to follow when applying for a crypto custody license in the country, the application does not include the number of details that BaFin will likely ask for, Resas added. While regulators focus on your customer’s knowledge and anti-money laundering now, BaFin is likely to make more rules around operational risks in the future.

Although unknown, having a crypto company enter the regulated German market is a progress for the crypto industry in general, said Florian Reul, managing associate for law firm Linklaters.

“You cannot shine more light in that area than with a BaFin license,” Reul said.

Crypto firm vs deposit bank?

In the BaFin guidelines in March, regulators said that security tokens originating from security token offers (STOs) could be stored by a crypto keeper, without the help of a deposit bank.

Two German finance ministers are working on a bill to discuss digital securities publishing, the release date to be decided after the Department of Justice has consulted with the Federal Government.

Although it is not yet known whether this digital security can be stored by crypto guards, technology to hold security tokens will be of interest if the law is passed, Winter said.

“Banks must acquire technology by buying crypto guards,” Winter said. “If [digital security custody] allowed to guard crypto, they will be in a much bigger market. ”

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