Deutsche Bank, a European banking giant, announced today its application to offer a crypto custody service under Germany’s Federal Financial Supervisory Authority (Bafin).
The crypto winter transforms into a season of opportunity as an increasing number of financial institutions take the dip.
David Lynne, head of the bank’s commercial banking unit, announced during a conference earlier this week that the digital asset services are in progress; in addition, the bank has submitted an application for a digital asset license to Bafin.
This significant move aligns with Deutsche Bank’s broader strategy to boost revenue in the corporate banking segment.
The step is also the efforts of DWS Group, an investment group and Deutsche Bank subsidiary, to expand its income streams through digital asset-related products.
Back in late 2020, Deutsche Bank’s corporate banking branches had hinted at plans to introduce a digital asset custody service, although no specific launch date was mentioned. Notably, Lynne took over the division a year ago from Stefan Hoops, who subsequently became the CEO of DWS.
Deutsche Bank, established in 1870 and headquartered in Frankfurt, stands as Germany’s largest private banking group.
With total assets of $1.3 trillion and a workforce of 77,050 employees, it ranks among the world’s largest banks. Operating across 72 countries, Deutsche Bank generates 75% of its profits from overseas operations.
The news arrived two months after the bank was reportedly connected to the U.S. banking crisis. Worries centered on Deutsche Bank’s investments in U.S. commercial real estate and derivatives, and mounted after Credit Suisse was acquired by UBS Group AG.
In March, Germany’s economy reportedly slipped into recession, adding more concerns to the future of the banking giant.
While Deutsche Bank is not the first German bank to enter the crypto space, as N26 Bank launched a crypto trading service in October 2022 for its 7 million users, it demonstrates the growing interest among traditional institutions to provide crypto-related services.
Despite the recent collapse of crypto-friendly banks in the US, such as Signature Bank, Silicon Valley Bank, and Silvergate Bank, the allure of becoming a crypto service provider remains strong, particularly in Hong Kong, which is reopening itself to the cryptocurrency sector.
Last month, ZA Bank, Hong Kong’s largest virtual bank, launched cryptocurrency conversion services. Meanwhile, the country’s authorities are also encouraging major banks to onboard crypto exchanges as customers and facilitate the opening of accounts for crypto users.
Necessary Boost or Hidden Threat?
Over the past few years, the skepticism of traditional banks regarding digital currencies has diminished. However, as institutional adoption has increased, a shift has occurred, with crypto insiders now assuming the role of skeptics.
Last week, BlackRock, the world’s largest financial management corporation, made a significant impact by applying for a Bitcoin ETF, causing ripples throughout the market. While rumors suggested that Fidelity was also considering a similar move, no official confirmation has been provided yet.
Financial institutions dipping their toes in the water could introduce new competition for exchanges. The focus is expected to shift towards price dynamics, becoming a key factor in the competition.
If approved, the ETF may result in reduced trading on exchanges. The majority of investors may prioritize price exposure, making the ETF an attractive option.
Additionally, ETFs are known for their cost efficiency, whereas exchanges like Coinbase tend to have higher fees. The reputable image of BlackRock compared to the sometimes-controversial crypto firms may influence investor preferences.
On top of the concerns, many believe that the active presence of those institutions will violate the “ethos” of decentralization. On the other hand, it’s undoubtedly that the ETF’s approval would be a significant win for Bitcoin and the crypto industry overall.
It remains to be seen whether the ETF will receive approval and how exchanges will adapt to the changing dynamics of the cryptocurrency market.