BaFin and ECB approve Germany’s DekaBank for crypto custody

Germany’s DekaBank has scored a major win, bagging a crypto custody license from BaFin, the country’s financial watchdog, and the European Central Bank (ECB).

The license was granted under the Banking Act (KWG) and DekaBank will be joining Commerzbank as one of the only traditional German banks to operate in this space. But let’s not get too excited—this is Germany, after all, where regulation is the order of the day, and every action is measured.

While BaFin has granted crypto custody licenses to 11 other firms, most of those have gone to crypto-native companies, like the digital asset custody arm of Hauck Aufhäuser Lampe Privatbank.

DekaBank’s license game is strong

What makes DekaBank and Commerzbank stand out is that their licenses fall under traditional banking regulations, giving them a level of legitimacy that smaller crypto firms can only dream of.

This isn’t DekaBank’s first big regulatory decision this year. Back in July, it snagged a license to operate as a crypto securities registrar. Translation? It can issue blockchain-based digital securities in Germany without needing a central securities depository (CSD).

This cuts out unnecessary middlemen, a very crypto thing to do. DekaBank is also a founding member of SWIAT, a blockchain platform designed for digital securities issuance.

It’s got giants like Standard Chartered and LBBW involved. Back in September, Siemens used SWIAT to issue a €300 million digital bond.

Germany’s regulatory speed bump

The Supervision of Crypto Markets Act (KMAG) is supposed to replace Germany’s old crypto rules with MiCA’s shiny new framework. But because the German government has been a political circus lately, the law was delayed for months.

It only passed on December 18, giving institutions like DekaBank the green light to expand their crypto operations across the EU. Before KMAG’s passage, the regulatory limbo made things awkward for banks.

Germany’s slow but steady approach to crypto regulation has its perks, though. Back in 2013, the country became one of the first to recognize cryptocurrencies as financial instruments. Then, in 2020, it made BaFin licensing mandatory for all crypto exchanges.

While other countries are still fumbling with vague guidelines, Germany’s clarity on crypto rules makes it a heavyweight in the European crypto scene. Admittedly, it is boring, but it works.

Germany’s crypto regulation is pretty much MiCA. But in the country, crypto held for over a year is exempt from capital gains tax, offering a major incentive for long-term investors.

However, if you sell within a year, the profits face regular income tax rates, which can hit up to 45%, plus a 5.5% solidarity surcharge. There’s some relief for smaller players, though—profits below €600 escape taxation entirely.

As for the market, it’s very active. Out of 2,400 private crypto investors surveyed, 54% said they allocate more than 20% of their total assets to digital assets. On average, these investors are putting over a quarter of their portfolios into crypto.

Security concerns are still top of mind, though. About 82% of investors flagged platform security as their number-one consideration when choosing where to invest. It’s no surprise that Bitcoin leads the pack, held by 91% of respondents, followed by Ethereum at 78%. Solana, a rising star, is also gaining traction.

The German market has had its share of drama this year too though. The most significant episode was probably when the government unloaded a massive 49,858 BTC for $2.89 billion—leftovers from a piracy case.

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