Crypto Custody License
BaFin license for providing crypto custody services (Kryptoverwahrgeschäft), classified as a financial service under KWG since January 2020, requiring segregation of client crypto assets.
German Banking Act (KWG) § 1(1a) Sentence 2 No. 6, MiCA
Capital Required
€125,000 minimum
Timeline
6-12 months
Fees
€10,000-50,000 application + €5,000-30,000 annual BaFin supervision
Regulatory Body
Federal Financial Supervisory Authority (BaFin)
Legislative Framework
MiCA Regulation (EU) 2023/1114, German Banking Act (KWG), German Securities Trading Act (WpHG)
Last updated: August 2025
Key Requirements
Establish German credit institution or financial services institution with BaFin authorization for crypto custody services.
Maintain minimum capital of €125,000 per KWG requirements with quarterly capital adequacy reporting.
Implement fit-and-proper requirements for management and supervisory board with KWG compliance and regulatory approval.
Establish IT security procedures per BAIT (BaFin Guidance on IT Requirements) including encryption, access controls, and incident response.
Develop customer crypto asset segregation procedures ensuring complete separation of client and proprietary assets.
Implement AML/CFT procedures per German Money Laundering Act (GwG) with customer identification and transaction monitoring.
Maintain professional liability insurance of minimum €1,000,000 covering custody service operation risks.
Application Process
Establish German legal entity (GmbH, AG, or bank) with proper corporate governance and management structure.
Prepare business plan describing crypto custody service offerings, technology platform, and security procedures.
Document capital adequacy with €125,000 minimum through bank accounts and audited financial statements.
Prepare detailed IT security procedures (BAIT-compliant) including encryption standards and incident response protocols.
Develop customer crypto asset segregation procedures with independent custody verification mechanisms.
Prepare compliance manual with AML/CFT procedures, customer due diligence, and transaction monitoring.
Submit crypto custody license application to BaFin with all supporting documentation and compliance procedures.
Engage with BaFin during assessment period (6-12 months) addressing regulatory inquiries.
Receive BaFin authorization decision and register as crypto custody service provider.
Expected Total Timeline
6-12 months
Ongoing Obligations
After obtaining your Crypto Custody License, these are the continuing compliance requirements you must maintain.
Maintain minimum €125,000 capital with quarterly capital adequacy reporting and annual audited financial statements.
File regulatory reports with BaFin including annual compliance certifications and financial disclosures.
Implement ongoing IT security updates per BAIT requirements with annual security audits and testing.
Conduct quarterly segregation audits verifying complete separation of customer and proprietary crypto assets.
Maintain AML/CFT compliance with customer due diligence and suspicious activity reporting per GwG.
Report material incidents including security breaches or customer fund loss to BaFin within 24 hours.
Maintain professional liability insurance continuously with annual renewal certificates and minimum €1,000,000 coverage.
Cost Summary
Capital Requirement
€125,000 minimum
Application & Licensing Fees
€10,000-50,000 application + €5,000-30,000 annual BaFin supervision
Jurisdiction Setup Cost
$30,000-$80,000
Annual: $20,000-$50,000
Other Germany Licenses
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