BaFin Granted Crypto Custody License to Coinbase
Germany’s financial watchdog BaFin granted the cryptocurrency exchange Coinbase permission to provide crypto custody services and proprietary trading on Monday. Coinbase Germany GmbH is the first company that obtained a license to provide crypto custody services in Germany. The announcement made by the country’s financial watchdog included one very interesting detail. Because this is a new business model, BaFin created a special team that will oversee any issues related to the crypto custody business.
Legislation passed by German lawmakers in 2019 required companies offering crypto custody services to apply for new licenses or cease operations in the country. The new legislation came into effect last year more precisely on January 1, 2020. It included precise guidelines for companies offering crypto-related services. While Coinbase is the first company to receive a license, the legal clarity of the new bill will encourage more banks in Germany to offer services around crypto-assets.
The company’s efforts to comply with regulations are not limited to Germany. Last week, Coinbase completed registration with the Japanese Financial Services Agency. Once registered, it will be able to offer crypto trading of assets like bitcoin and ethereum in Japan. As crypto adoption increases, companies offering crypto services will need to tread carefully to avoid backlash from regulators.
After going public via a direct listing in April, the company reported Q1 profits of $771 million, tripling its earnings from the previous quarter. As the company expands into new markets, having a firm foundation with regulatory backing continues to be a top priority.
Coinbase and other cryptocurrency exchanges
In contrast to Coinbase, other crypto-related companies have come under scrutiny for their lack of regulation. For instance, Japan’s Financial Services Agency recently issued a second warning to Binance for operating without registration. The country’s financial regulator issued its first warning in 2018.
The company was previously found to be operating in Malta without a registration. Another regulator, the U.K.’s Financial Conduct Authority, banned Binance from offering crypto derivatives in the country. It is also no longer serving customers in Ontario, Canada due to regulatory pressures.
Coinbase Germany’s approval comes two months after the German financial watchdog issued a warning about Binance’s stock tokens offering. BaFin rejected Binance’s request to remove the warning. The regulator stated that under German law, it is not legal to sell securities, and other “investments products” without approval.