6 months ago
The German financial authority BaFin has further clarified the country’s new crypto custody law. It has established rules for firms based outside of Germany, but serving the German market.
In its latest guidance on the crypto custody law, the Federal Financial Supervisory Authority (BaFin) says firms already providing custody services for digital assets for Germans would not be penalized for not having a license. However, it requires such companies to declare their intent to apply for a license by March 31 and submit the application by November 30. Crypto firms that had not offered custody services for German customers before January 1 are not allowed do so until they have received a license.
“Nobody has the ability to apply right away, which is why we have these grandfathering mechanisms,” says Carola Rathke, partner at Eversheds Sutherland Germany. The company is working directly with BaFin on how the law should be enforced.
Germany drafted the law, which came into force on January 1, 2020, in response to the European Union’s Fifth Anti-Money Laundering Directive (AMLD5). It requires crypto firms to demonstrate compliance with enhanced know-your-customer (KYC) and anti-money-laundering (AML) procedures. BaFin is expected to release further guidance in the next several months.
Aspects requiring clarification include custody services using multi-party computation. In addition, the law stipulates that firms applying must have a German branch with directors who are “fit and proper,” yet does not specify what makes a manager in crypto right for the job.
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