Digiti­zation of payment transactions

The topics of crypto assets, crypto currencies and, in particular, crypto deposits are becoming increas­ingly important. This means that the trend is moving towards the digiti­zation of payment trans­ac­tions and the financial industry.

The basis is the Distributed Ledger Technology (DLT) — the technology of “distributed ledgers” — whose currently best-known technical imple­men­tation is the Blockchain archi­tecture. The main difference to classic monetary systems and financial instru­ments is that trans­ac­tions are legit­imized in a decen­tralized manner and stored with the partic­i­pants. Trust and manip­u­lation security, which are ensured in the classic environment by a central authority — such as a bank — are carried out here via trans­parency and crypto­graphic processes. Ownership of crypto assets is repre­sented by possession of a private crypto­graphic key.

New, forward-looking business areas for banks and financial service providers

For banks and financial service providers, this devel­opment offers great oppor­tu­nities to develop new, forward-looking business areas. In particular, in the crypto deposit business, they can store, manage and secure crypto assets or associated private crypto­graphic keys for their customers.

Even if the central instances as trust anchors are elimi­nated in the field of DLT, banks can use their expertise in the imple­men­tation of regulatory require­ments as well as their already existing compe­tencies in dealing with crypto­graphic proce­dures (e.g. in autho­rization, online banking or PIN security) to create a good starting position in the market of services for crypto assets and cryptocurrencies.

Regulatory issues on crypto custody

For the accep­tance and use of the new technologies, legal certainty, uniform require­ments and an appro­priate regulatory standard are needed.

To this end, the Act Imple­menting the Amending Directive to the Fourth EU Money Laundering Directive included crypto deposit business as a new financial service in the German Banking Act (KWG) at the beginning of 2020. In addition, the EU Commission launched a digital finance package in September 2020, the contents of which include the Proposal for a regulation on Markets in Crypto-assets (MiCA) and a pilot project for DLT-based securities. In June 2021, a digital alter­native to the tradi­tional paper certificate was also created with the entry into force of the Electronic Securities Act (eWpG). Finally, in July 2021, the go-ahead was given for the trial phase of the Digital Euro by the European Central Bank (ECB).

Crypto deposits and the Digital Euro are forward-looking tools that can strengthen the compet­i­tiveness of Germany and Europe. However, the regulatory framework for this is still very much in motion. For example, the technical design of the digital euro has not yet been deter­mined. It is not expected to be intro­duced before 2023. The EU’s new MiCA regulation is also still being agreed.

Towards an individual crypto service

We follow the exciting devel­op­ments in the field of crypto assets, crypto currencies and the Digital Euro for you and support you in the realization of your crypto deposit service. We gladly inform you about the possi­bil­ities to get involved in this innov­ative sector.