Deutsche Bank Applies for Digital Asset License Amid Growth Push

Updated: 20 June 2023

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Deutsche Bank has reportedly sought approval from German regulatory authorities to venture into digital asset custody services. This development comes in the wake of BlackRock’s recent application for the establishment of a Bitcoin exchange-traded fund (ETF) in the United States.

Deutsche Bank Seeks Approval for Crypto Custody Services

Deutsche Bank, the largest bank in Germany, is seeking regulatory approval to provide custody services for digital assets, including cryptocurrencies. According to David Lynne, the head of the bank’s commercial banking unit, Germany’s largest bank, which holds about $1.4 trillion in assets, will venture into safeguarding cryptocurrencies if approved.

Deutsche Bank applies for digital asset license. 🤷‍♂️

— CZ 🔶 Binance (@cz_binance) June 20, 2023

https://twitter.com/cz_binance/status/1671132971380662274?s=20

“We are expanding our digital assets and custody business. We just put our application into the Bafin for the digital asset license,” said David Lynne.

Deutsche Bank’s decision to offer crypto custody services aligns with its corporate banking division’s broader strategy to increase income fees.

The move is also in line with the efforts of Deutsche Bank’s investment arm, DWS Group, which previously announced a deal to generate revenue through solutions related to digital assets.

Deutsche Bank’s decision to enter the digital asset and crypto custody arena comes almost three years after its corporate bank initially suggested such intentions. However, the bank had remained tight-lipped regarding the timeline for the rollout of these custody services.

Germany’s Welcoming Approach to Crypto Industry

Germany has supported the crypto industry by introducing a bill in 2019 to allow crypto custody and trading services through licensed institutions, aligning with the EU’s Fourth Anti-Money Laundering Directive.

BaFin, the regulatory authority in Germany, issued four licenses for crypto custody and granted provisional permits to 14 institutions by December 2022. In June 2021, Coinbase Germany became the first company to secure a BaFin license for operating a crypto custody platform.

Germany grants Coinbase licence for crypto custody services https://t.co/D54euzooWM pic.twitter.com/ogi2gAaRnF

— Reuters (@Reuters) June 28, 2021

In March 2023, German regulators granted custody and trading services licenses to Boerse Stuttgart Digital, the country’s stock market operator, and Finoa, a cryptocurrency trading platform.

Banking and Financial Giants Drive Growth in Crypto Market Capitalization

With banking and financial powerhouses stepping into the cryptocurrency arena by providing crypto custodial services and Exchange Traded Funds (ETFs) to institutional clients, the usage and overall market capitalization of cryptocurrencies are predicted to undergo significant expansion.

Institutional investors have become increasingly crucial players in the cryptocurrency space, particularly since the 2017 Bitcoin boom. However, the events of 2022, such as the failure of Terra’s LUNA and UST tokens, as well as the FTX exchange’s insolvency caused institutional capital to withdraw from alternative cryptocurrencies and major digital assets.

Consequently, the overall market value of cryptocurrencies experienced a significant decline. However, with institutions slowly adopting crypto assets, it is anticipated that capital inflows will increase, thereby restoring the crypto ecosystem.

Paradigm Shift as Traditional Finance Embraces Digital Assets

The growing acceptance of digital assets by traditional finance is causing a paradigm shift in the investment landscape. Institutions and major players in finance are increasingly recognizing the potential of cryptocurrencies and blockchain technology, leading to more investment and innovation in the sector.

BlackRock, the world’s largest asset manager, has made notable advancements in introducing a spot Bitcoin ETF. And even though they have been facing opposition from the U.S. Securities and Exchange Commission (SEC) the potential approval of such an investment product would have a significant impact.

BlackRock’s application has emerged during a pivotal time for cryptocurrencies in the U.S., with the securities regulator recently filing two lawsuits against Binance and Coinbase, accusing them of misconduct.

In contrast, Europe’s regulatory environment appears to be more defined, particularly following the enactment of the groundbreaking MiCA regulation.