German Banks Want to Offer Custody Services for Top 3 Cryptocurrencies

According to local news outlet Handelsblatt, German Banks are interested in providing custody services for the top 3 cryptocurrencies- Bitcoin (BTC), Ether (ETH) and Ripple’s XRP (XRP).

Digital custody services

German government officials confirmed that banks in the country are interested in providing digital asset custody services to their clients. The German financial regulator BaFin said that it has already received more than 40 applications from institutions and entities interested in offering digital asset custody services.

This interest spins out of the updated Money Laundering Act of Germany. The Act allows banks in the country to provide stocks, bonds, and other traditional securities alongside digital assets. This includes the likes of Bitcoin and Ether, two of the most popular digital currencies today.

The possibilities in digital asset space

Since Bitcoin was introduced over a decade ago, digital currencies have come a long way. In the last 3 years, interest in digital currencies has skyrocketed because of which the market for these assets is growing at a rapid pace. These assets are being used for payments as well as for investments and trading. The market capitalization for digital currencies has already crossed $288.3 billion.

BaFin’s greatest challenge in digital currencies is anonymity. The exploitation of digital assets could lead to criminal activities, like terror financing and money laundering. Therefore, the regulator is urging businesses to seek a license if they are interested in offering custody services. The new German AML laws are based on the fifth anti-money laundering directive (AMLD5) adopted in the wider European region. The laws require all companies dealing in cryptocurrencies to ensure that they comply with standard AML and Know Your Customer (KYC) procedures.

Talking to Handelsblatt, FDP -Bundestagsabgeordnete Frank Schäffler said,

“The market is growing faster than the Federal Ministry of Finance has predicted. That is both a blessing and a curse. The high demand for crypto custody licenses shows that companies are increasingly adopting blockchain technology, and this is also the result of the new legislation.”

BaFin has given a November 2020 deadline for institutions interested in dealing with digital assets to establish relevant compliance procedures.