As a result of the implementation of the fifth money laundering directive, crypto values were included in the German Banking Act (KWG). This long-awaited regulation of cryptocurrencies now enables banks to store crypto values for their customers in addition to their traditional banking business.
New business opportunity for banks
Cryptocurrencies were not regulated by law for a long time. Therefore, only the former view of the Federal Financial Supervisory Authority (BaFin) could be used as a basis. With the change in the law, crypto values are now defined as digital value units which are issued by private individuals, transmitted electronically and accepted as means of payment in commercial transactions or used for investment purposes. Only utility tokens, which can only be used to relate services in the issuer’s network, are not covered by the definition.
As a result of the amendment to the German Banking Act, banks are now also opening up the business field of cryptocurrencies. More than 40 banks are said to have already submitted an expression of interest to BaFin for a license to operate the crypto custody business. This means that in the near future, consumers will probably have the option of depositing cryptocurrencies such as Bitcoin or Ethereum via conventional banks in addition to euros, dollars and the like.
Banks require separate license
However, in order to be able to enter into the so-called crypto custody business, banks require a separate license, which must be applied for at the BaFin. If a company already offers crypto deposit services, it can apply for a license from BaFin until November 2020 thanks to the transitional period. If a bank wishes to enter this field of activity, the application must be submitted before the business is started.
Crypto business and conventional banking business go hand in hand
First of all, it could be seen from the draft law that crypto custody transactions should not be carried out in conjunction with other transactions requiring authorization. This would have meant that a bank would have had to decide whether to pursue the conventional banking business or to limit itself to cryptocurrencies alone. However, this provision was deleted on the recommendation of the Finance Committee. Banks can therefore also work with cryptos in the future in addition to their normal activities.
If you are interested in a BaFin license for the crypto custody business, our experienced attorneys will be happy to assist you.