German cryptocurrency firms still get denied banking services

Cryptocurrency companies in Germany are still experiencing difficulties opening bank accounts. It's connectedwith banks distrusting the industry and lack of clarity of regulation.

While more than 40 banks had previously expressedinterest in obtaining a license to provide custody services for crypto assets, cryptocurrency firms are failing to earn the trust of traditional financial institutions.

"If you are trying to open a bank account forcompany related to cryptocurrencies, you need to interact with the institutional division of the bank,” — said Crypto Storage AG CEO Stijn Vander Straeten.

German bankers are risk averse andCryptocurrency companies do not bring them income by the mere fact of opening a current account. In November, the Swiss company Crypto Storage AG opened a German branch in Frankfurt, Crypto Storage Deutschland GMBH, to be able to apply for a license to store crypto assets. Let us recall that last fall it became known that from 2020 German banks will be able to sell cryptocurrencies and offer custody solutions for crypto assets.

According to Straten, about 15 banks rejected requests to open a Crypto Storage Deutschland account before one of the organizations approved the firm’s request.

“Various cryptocurrency companies are contacting us,who want to enter the German market and operate in accordance with regulations. Many of them face similar problems,” — said Matthias Winter, partner at Eversheds Sutherland Germany, a firm working directly with German regulators to implement the new law. “Banks have no legal basis to refuse service to cryptocurrency firms, but they are hesitant because they do not understand the industry.”

Earlier this year, BNP branch managerParibas Securities Services in Germany and Austria Thorsten Gommel announced that the bank plans to maintain leadership in custody services, including the storage of digital assets. However, now the bank, apparently, has changed its intentions.

“As the world's leading custodian, weWe are closely monitoring the development of the storage of crypto assets,” — said BNP Paribas spokeswoman Caroline Lumley. “We are currently exploring what services can be developed for digital assets associated with the tokenized economy, with a particular focus on regulated assets.”

Regulatory uncertainty

According to Daniel Resas,associate partner Schnittker Möllmann Partners — company that advises banks on blockchain projects, industry participants themselves still do not understand exactly which operations will qualify as storage of crypto assets.

Cryptocurrency exchanges can be considered custodians.crypto assets. Moreover, if the company's business model includes placing a digital asset in a smart contract for a limited period of time, it is unclear whether this will be considered storage in accordance with applicable German law, Resas notes.

In early February, BaFin made it clear thatcryptocurrency firms will be considered custodians if they have access to the client's private keys. This may exclude service providers who only have access to encrypted versions of private keys, but how multiparty computing firms will be treated is still unclear.

Despite some uncertainty, cryptocurrencies entering the regulated German market are a great achievement for the industry as a whole, Linklaters senior lawyer Florian Reul said.

“Obtaining a BaFin license is a unique opportunity for cryptocurrency companies and a big step for the industry as a whole,” — Reul said.

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