Zurich-based financial group Crypto Finance AG has secured four licenses from the German Federal Financial Supervisory Authority (BaFin). This license is for Germany’s Crypto Finance, a subsidiary of the group, which allows it to provide trading, settlement and custody services for digital assets in that country.
The news comes at a time of surging interest in cryptocurrencies and other financial assets in the world’s third-largest economy. Not only have local politicians advocated for Bitcoin adoption, but both individuals and private institutions are showing a growing appetite for cryptocurrency exposure.
Institutional interest in cryptocurrencies is driving competition
Crypto Finance has been redoubling its efforts to solidify its presence in the European cryptocurrency market following its acquisition by Deutsche Börse Group in 2021. The group acquired the company to lay the foundations for building a “European regulated digital asset ecosystem.” .
The four licenses mean Crypto Finance can now operate as a digital asset manager in Germany and Switzerland, where it is regulated by FINMA. The company will continue to focus on providing “highly regulated services” to institutional investors, particularly those “seeking access to the dynamic world of digital assets.”
Recently, institutional interest in cryptocurrency and blockchain has been increasing in Germany. Last year, Commerzbank became the first bank in the country to receive a cryptocurrency custody license. This year, Germany’s second-largest bank, DZ Bank, plans to pilot cryptocurrency trading. As more institutions explore cryptocurrency-related services, competition is becoming more intense.
Deutsche Börse Group has referred to blockchain and distributed ledger technology as “a game changer for financial markets.” The group plans to launch its own cryptocurrency exchange known as Deutsche Börse Digital Exchange. The company has already been included in the group’s 2022 annual financial report, although not many details are known at the moment.
Meet tokenized environmental assets
Neutral and DLT Finance announced a partnership last week to launch the first platform for “tokenized environmental assets.” These tokenized assets include carbon and renewable energy credits, two markets estimated to be worth more than $103.8 billion and $11.4 billion, respectively.
DLT Finance’s regulatory services enable the platform to launch in Germany as the company holds the necessary BaFin license to operate in Germany. Neutral’s technology, on the other hand, enables “efficient interactions and transactions,” allowing users to buy, sell and interact with tokenized environmental assets.
According to Neutral co-founder and CEO Farouq Ghandour, interest in these platforms has been growing over the past few years. But with regulators unable to keep up with technological advancements, companies providing these services have been unable to meet demand. Ghandour called the partnership a “first step” in “bringing legitimacy, price discovery, and liquidity to the on-chain environmental asset ecosystem.”
Cryptocurrency adoption is growing in Germany
A survey by Paysafe found that 28% of respondents in Germany owned cryptocurrency at some point in the past 12 months. This ratio was significantly higher than Italy (17%) and Poland (8%), and only 4 points compared to France and the UK.
The survey also found that digital wallets could be the best vehicle for widespread cryptocurrency adoption, as they were the preferred local payment method for 25% of all respondents. The company also concluded that adoption of cryptocurrencies and related services is “likely to increase” due to cryptocurrency-friendly regulations.
According to Chainalytic’s 2023 report, “trustworthy regulation and education provided by institutions to investors” was one of the most important factors driving growth in Germany. According to Dr. Sven Hildebrandt, the country has “a very strong historical path in technological blockchain development” and has the highest number of jobs in the sector.
Regulation has long been seen as the enemy of cryptocurrencies in the United States, where legislators and regulators cannot agree on a stance. However, Germany has become an increasingly attractive destination for companies looking to leverage blockchain and DLT technologies.