As the cryptocurrency sector expands across the globe and across industries, banking institutions are confronting rising client demand to provide crypto-related services and investments in a safe and regulated manner.
Commerzbank, situated in Germany, is one of the banks that has taken the initial steps toward delivering digital asset-related services, having announced its application for a crypto custody business license from the country’s Federal Financial Supervisory Authority (BaFin).
According to a spokesman from Commerzbank, 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 and exchange digital currencies for their clients. This license has been required for doing business with cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) since January 1, 2020. (ETH).
Why is the BaFin license required?
The decision to operate regulated financial services without a license carries a criminal penalty of up to five years in prison for those responsible. However, the law includes generous transitional provisions for organizations that were already conducting related transactions prior to the directive’s implementation.
Commerzbank, which serves roughly 28,000 corporate customer groups and close to 11 million private and entrepreneurial clients in Germany, plans to offer crypto custody services primarily to institutional clients.
It has joined a long list of organizations that have applied for the permission to become a crypto custodian. According to the financial authority, it has already received 25 license applications and has accepted four of them.
Coinbase is the first company in Germany to receive a crypto custody license in January 2021. Commerzbank is the first bank to apply for it.
Banks broaden their reach as demand rises.
Banks throughout the world are increasingly interested in expanding their services to include cryptocurrency. One of them, is the banking behemoth Goldman Sachs, which wants to launch crypto services for its high-net-worth clientele in the second quarter of 2022.
Furthermore, Blythe Masters, a board member and fintech expert at Credit Suisse, has claimed that Bitcoin does not pose a danger to fiat money or the banking sector. On the other hand, some cryptocurrency specialists believe that cryptocurrencies will make some banking services “irrelevant.”