Crypto Custodians Grapple With Germany's New Rules

Crypto firms in Germany are getting ready to exist under a new regime.

Under a law going into effect Jan. 1 requiring digital asset custodians to be licensed, each company that currently custodies crypto and targets German clients must announce to Germany's Financial Supervisory Authority its intention to get a license before April 1 and submit an application before Nov. 1.A clause allows current crypto custodians to keep serving German customers without being penalized if they declare their intent to apply, but those same companies are waiting on BaFin to release final regulations around the law.

While the final regulations haven't been set yet, the new license requirement may not produce the same kind of exodus of crypto firms that New York saw after the BitLicense requirement, said Miha Grčar, head of business development at Bitstamp.

London-based Bitstamp, one of Europe's largest crypto exchanges, plans to continue operating in Germany but declined to say whether it would apply for a license, said Grčar.

Crypto firms could also use a white-labeled custody service to operate in Germany.

Ulli Spankowski, chief digital officer and managing director of the crypto custody subsidiary of German stock exchange Boerse Stuttgart, called Blocknox, sees the license as a step forward for "The professionalism of the industry." The subsidiary has already advised BaFin that it plans to apply.

DLC group is taking advantage of the new regulatory framework by offering consulting services for firms interested in applying, and its own white-labeled crypto custody service.

Switzerland-based Crypto Storage AG, a subsidiary of Crypto Finance AG, is opening a branch in Germany to offer crypto custody to banks and then financial technology startups.

"Large banking houses will do custody business in the future," Stijn Vander Straeten, CEO of Crypto Storage AG, said.

In addition to waiting for details from BaFin, crypto firms are also waiting to see if the law can be passported to other European Union states.