The largest bank in Germany by total assets has applied to the BaFin (Federal Financial Supervisory Authority) for regulatory approval to operate a custodial service for digital assets such as cryptocurrencies. With this move, Deutsche Bank aims to further enter the crypto industry.
By obtaining a license from the BaFin, companies are allowed to offer and promote their crypto services in Germany. Specifically, Deutsche Bank's application pertains to the area of crypto custody, which is a subsector of the crypto industry closely aligned with traditional banking and essential for the industry.
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Deutsche Bank expands its crypto offering
In general, the financial institution, with $1.4 trillion in managed assets, aims to increase the corporate banking division's fee income through this venture into the industry, as reported by Bloomberg, citing David Lynne, the head of the department. This effort is a continuation of Deutsche Bank's asset management arm, DWS, which has been seeking to capture revenue in the crypto sector. In April, the 80% subsidiary entered into a strategic partnership with Galaxy Digital to develop exchange-traded crypto products.
"We are expanding our digital asset and custody business. [...] We have just submitted our application for the license for crypto custody with BaFin." - David Lynne, Head of Corporate Banking at Deutsche Bank
The relevant departments of Deutsche Bank initially expressed their intention to offer crypto custody for clients by the end of 2020. However, a specific timeline for the launch was not provided. At that time, the business division was under the leadership of Stefan Hoops, who later transitioned to become the Chief Executive Officer at DWS. Approximately a year ago, Lynne took over as the head of Corporate Banking.
Crypto custody requires its own license in Germany
In 2020, crypto custody services were included as a new financial service in the German Banking Act (Kreditwesengesetz or KWG). Therefore, companies wishing to provide these services require explicit permission from the financial supervisory authority. The guidelines set by BaFin aim to regulate the custody of digital assets, ensuring consumer protection and mitigating potential risks associated with cryptocurrencies.
To obtain approval as a crypto custodian, institutions like Deutsche Bank must meet strict organizational and security requirements to protect the assets they hold. This includes implementing robust risk management systems, maintaining adequate capital reserves, and establishing clear governance structures. Overall, Deutsche Bank's move, once approved by BaFin, is likely to represent a significant step for institutional crypto adoption.
