As the cryptocurrency market spreads across all parts of the world and various industries, banking institutions are facing increased demand from clients to offer crypto-related services and investments in a safe and regulated way.
One of the banks that has taken its first steps in introducing digital asset-related services is German-based Commerzbank, which has announced its application for the country’s Federal Financial Supervisory Authority (BaFin) license for a crypto custody business.
Specifically, Commerzbank’s representative said that the bank “applied for the crypto custody license in the first quarter of 2022,” as first reported by Börsen-Zeitung on April 14.
Indeed, the authority grants the BaFin license to financial institutions that want to store digital currencies for clients and also to trade them. Since January 1, 2020, this license has been mandatory for doing business with cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).
Why is the BaFin license necessary?
Deciding to operate regulated financial services without the proper license carries the risk of a criminal penalty of up to five years in prison for the persons responsible. However, the law also prescribes generous transitional provisions for organizations that had already been conducting related transactions before the directive came into force.
Commerzbank, which provides services to nearly 28,000 corporate client groups and close to 11 million private and entrepreneurial clients in Germany, intends to offer the planned crypto custody services to primarily institutional clients.
By applying for the license to become a crypto custodian, it has joined a long list of institutions trying to obtain it. According to the financial regulator, it has already received 25 applications for the license so far and has already approved four.
Banks expand horizons as demand grows
Elsewhere, banks around the world are increasingly showing interest in expanding their services to cryptocurrencies. As Finbold reported, one of them is the banking giant Goldman Sachs, which plans to launch crypto services for its high net worth clients in the second quarter of 2022.
Furthermore, a board member and fintech expert Blythe Masters of Credit Suisse has argued that Bitcoin was not a threat to fiat money or the banking sector. On the other hand, there are crypto experts who believe that cryptocurrencies will render some banking services ‘irrelevant’.