Crypto Custody Business

After the German Federal Financial Supervisory Authority ("BaFin") had commented on the requirements of the newly financial service "made in Germany" - the crypto custody business - (we reported on this in detail in the first part of our series of articles on crypto custody business), it has now followed up. The guidance notice "Notes on the application for a licence for crypto-custody business" ("Guidance Notice") published on 1 April 2020 is a brief Need-to-Know for all those wishing to apply for a licence to provide the crypto custody business, which was recently designated a financial service. Is BaFin overreaching the goal by setting too strict requirements? Answer: Yes and No.

Since the beginning of the year, crypto custody business (Kryptoverwahrgeschäft) has "officially" joined the club of regulated financial services. For the first time, Germany’s Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) has now commented on what it considers to be the decisive questions for crypto-custodians (Kryptoverwahrer) and those who want to become one. In its new guidance notice, BaFin has published information on crypto-regulation and given some indications of its administrative practice to be expected in this respect. However, it seems worth discussing whether this will result in increased legal security for all parties involved. Even after reading BaFin’s guidance notice, a question remains open: BaFin licence, yes / no / maybe?