The financial landscape in Germany is poised for a significant shift, as the country’s largest banking institution, Deutsche Bank AG, makes strategic strides into the realm of cryptocurrency.
With plans to establish a digital asset custody service, Deutsche Bank’s ambitions indicate an evolution in Germany’s already forward-thinking approach to crypto regulation.
In a recently unveiled strategy, Deutsche Bank AG announced that it is seeking regulatory permission to offer custody services for digital assets, effectively expanding its services into the world of cryptocurrencies.
David Lynne, the head of Deutsche Bank’s commercial banking unit, disclosed that the bank has filed its application with BaFin, the German securities regulator, a major step in realizing their digital asset ambitions.
This move represents a broader approach by the bank to augment fee income in its corporate banking sphere. It also parallels Deutsche Bank’s investment division, the DWS Group’s, endeavours to boost income from digital asset-associated offerings.
Reports indicate that the German financial giant has been developing a crypto asset custody platform since late 2020, with plans for a pilot initiative contingent upon global client interest.
Considering Deutsche Bank’s stature as Germany’s largest bank and Europe’s ninth largest with assets worth $1.3 trillion, its pivot towards digital assets is noteworthy.
This shift marks a significant change of tune for the bank, which previously referred to Bitcoin’s value as based on “wishful thinking” in a 2019 research note.
A welcoming regulatory climate
The climate for crypto innovation in Germany has been notably encouraging. The country’s legal framework has been adjusted over the years to accommodate the growth of the crypto industry.
German lawmakers made a pivotal move in 2019, introducing legislation to enable crypto custody and trading services across the nation’s banking sector.
BaFin, the German securities watchdog, reported that by the end of 2022, it had issued licenses for crypto custody to four entities and had given provisional permits to an additional 14 institutions. The first such license was granted to Coinbase Germany in mid-2021.
Among the recent recipients of BaFin’s crypto custody and trading licenses are Boerse Stuttgart Digital, the operator of Germany’s stock market, and Finoa, a cryptocurrency trading platform. Both entities were awarded licenses in March 2023.
The banking sector’s role in society has drastically shifted over the last few decades. Claudio de Sanctis, the soon-to-be head of Deutsche Bank’s private bank division, speaks to this change, acknowledging that banks have lost their role as a central aggregator in society.
Despite this, de Sanctis contends that banks continue to serve a crucial economic purpose.
While specifics on his vision for the bank’s future were sparse, it’s clear that the bank is interested in diversifying its revenue streams. The push towards digital assets is part of Deutsche Bank’s larger management shake-up.
De Sanctis’ appointment, expedited months ahead of its initial plan, indicates the bank’s desire to establish clear responsibilities early on.
As Deutsche Bank makes strides in its digital journey, it continues to grapple with challenges such as technology integration issues and cost-cutting measures.
However, as the bank prepares to venture further into the digital realm, one thing remains clear: the financial industry in Germany, and indeed Europe, is primed for a significant shake-up.
