Katherine Ross

Germany’s financial regulator, the Federal Financial Supervisory Authority, published a post on Monday focused on what the regulator can learn from the “turbulence” in the crypto markets.&nbsp;



Schaefer likened the need for crypto regulation to flight rules, arguing that passengers are at risk if there isn’t “orderly air traffic.”



“Some crypto assets and decentralized finance projects certainly resemble unidentifiable flying objects. It would be negligent to simply ignore them,” Ruper Shaefer, executive director of strategy, policy and control at BaFin said.&nbsp;



“As financial regulators, we are sitting in the tower. We must know their characteristics, understand them, know their route and intervene if necessary. This is the only way we can ensure safe and orderly air traffic. Market participants can then also benefit from distributed ledger technology (DLT) in the long term,” he wrote.



Schaefer praised the Markets in Crypto Assets (MiCa) framework, <a href="https://blockworks.co/news/eu-parliament-passes-mica-vote">which passed the European Union parliament vote in April</a>. He added that “technical standards” need to be taken into account now in order to implement the regulation.



BaFin added that it supports the International Association of Securities Commission&#8217;s commitment to both protecting investors and ensuring integrity across the crypto markets.



“Now the common principles must be implemented consistently and consistently worldwide,” Schaefer <a href="https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Fachartikel/2023/fa_bj_2309_BaFinTech_Kurzkommentar_EDSPS.html;jsessionid=2D637680B4E46C6A1D8724AF81136A5D.2_cid371?nn=8228448">wrote</a>.



BaFin noted that it takes its “supervisory standards seriously,” meaning that the regulator will only grant “permission” to crypto companies that “have a plausible business model, sufficient start-up capital and reliable management staff.”



Schaefer wrote, “It must not be the case that providers with potentially dubious business models and lax compliance operate from virtual locations. Only then can we create a level playing field and an orderly airspace in which all passengers feel safe, even on long-haul flights.”



Back in July, <a href="https://blockworks.co/news/binance-exits-european-markets">Binance withdrew its BaFin application “proactively,”</a> as previously reported by Blockworks.



The withdrawal came after Finance Forward reported that BaFin declined to grant the license.&nbsp;



The move came as Binance reshuffled its European plans, <a href="https://blockworks.co/news/binance-leaves-netherlands-cyprus">withdrawing from the Netherlands</a> and delisting from the country’s register in Cyprus.



Binance previously told Blockworks that it is “working hard to prepare our business to be fully compliant with MiCa” prior to its official rollout.



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BaFin

German regulator compares crypto projects to UFOs in push to regulate space

Shalini Nagarajan

Cryptocurrency exchange Coinbase isn’t shying away from advertising despite cutting costs in other areas.&nbsp;



The exchange is strengthening ties with German soccer club Borussia Dortmund (BVB), local outlet Handelsblatt <a href="https://www.handelsblatt.com/finanzen/banken-versicherungen/banken/fussball-bundesligist-coinbase-macht-partnerschaft-mit-borussia-dortmund-oeffentlich/28932058.html" target="_blank" rel="noreferrer noopener">reported</a>. 



After establishing a partnership in July 2021, the club displayed ads for Coinbase on screens in its stadium and held crypto-related educational workshops for its employees.



That partnership is now leveling up as advertising will expand across marketing channels, including ads on the club’s stadium perimeter board, which will enhance virtual exposure for Coinbase at local events.



A Coinbase spokesperson previously told Blockworks the exchange intends to keep all its <a href="https://blockworks.co/news/crypto-sports-deals-slow">current sports sponsorship commitments</a>.



For now, the partnership has a time period and will reportedly last until June. The club’s managing director Carsten Cramer indicated that prudence is due to the crypto industry still being relatively new. “That&#8217;s why we want to keep our flexibility open,” he told Handelsblatt.



Borussia is the name of a local Dortmund brewery. The football club which dates back to 1909 is  <a href="https://www.boerse-frankfurt.de/equity/borussia-dortmund-gmbh-co-kgaa" target="_blank" rel="noreferrer noopener">listed</a> on the Frankfurt Stock Exchange, so it has a responsibility to shareholders to be cautious about its partnerships.



Coinbase was the <a href="https://www.coinbase.com/blog/coinbase-secures-first-crypto-licence-in-germany" target="_blank" rel="noreferrer noopener">first</a> company to gain a license for crypto custody from the German Federal Financial Supervisory Authority (BaFin) in June 2021, which was a significant reason for the club’s decision to partner with the company.



Now, some five companies hold the same permit.



Neither Coinbase nor BVB have mentioned how much BVB is getting for the sponsorship,&nbsp; though Cramer said they “didn’t receive the most tempting offer.”



The soccer world has become an attractive sector for crypto partnerships. Crypto[dot]com was a prominent brand in last year’s FIFA World Cup held in Qatar. And Coinbase already inked <a href="https://pr.nba.com/coinbase-nba-partnership/" target="_blank" rel="noreferrer noopener">sports partnerships</a> with the National Basketball Association, the Women’s National Basketball Association and other affiliates in 2021.



Still, the exchange was impacted by the crypto winter and cut more than 2,000 jobs in the last year. It also recently decided to pull out of a major crypto market, saying it would shut down <a href="https://blockworks.co/news/coinbase-follows-kraken-to-japan-exit">operations</a> in Japan.&nbsp;



Coinbase and BVB expect to decide whether to extend their partnership by April or May.



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Coinbase Seeks Brand Exposure with Germany’s Second-largest Soccer Club

<div id="highlights-block_6262cc120e9ec" class="highlights">
 <ul>
 <li>Crypto custodial services were first brought under the purview of German financial regulators in January 2020</li>
 <li>European Union watchdogs are still in the process of drafting and implementing their own regulatory measures on digital assets</li>
 </ul>
 
</div>



Commerzbank, Germany’s fourth-largest bank, has confirmed it wants to offer digital assets custody and exchange services to clients, joining a growing number of conservative banks in Europe moving into digital assets.



Bernd Reh, a Commerzbank senior spokesman, confirmed to local media <a href="https://www.boersen-zeitung.de/banken-finanzen/commerzbank-beantragt-krypto-verwahrlizenz-303b9c3a-bbeb-11ec-8e62-5f7cf1d225cc" target="_blank" rel="noreferrer noopener">Börsen-Zeitung</a> last week that the bank applied for a license in January from BaFin, Germany’s Federal Financial Supervisory Authority, and that the bank would first focus on institutional customers. The banking giant currently has 70,000 corporate and institutional clients worldwide.



“Where traditional and large banks until very recently have seen crypto as competition and shied away from it, we now start to see adoption even from some of the most conservative players in the banking field,” Mikkel Morch, executive director at crypto hedge fund ARK36, said. Commerzbank, which had some 541 billion euros ($583 billion) under management in late 2021 according to its latest financial statement, has been working on several blockchain projects since 2018.



In January 2020, Germany introduced crypto custody into the German Banking Act as a new financial service. “Crypto custody business is also subject to the notice issued by [the German central bank] Deutsche Bundesbank on the granting of authorization to provide financial services,” BaFin says on its website dedicated to crypto licensing.&nbsp;



The regulator is also cracking down on unauthorized activity. Recently, the supervisory authority opened investigations into several crypto services companies that have not been granted authorization to operate in the country. If found guilty, individuals involved could face up to five years in prison.



Authorities and legislators in the European Union are still in the process of building regulatory regimes, but some, such as those in Germany and Portugal, already have registration procedures in place.



And traditional banks are increasingly applying for crypto licenses in Europe, including in Portugal, where <a href="https://www.securities.io/portugals-bison-bank-granted-the-license-to-offer-crypto-custody-services/" target="_blank" rel="noreferrer noopener">Bison Bank</a> last week became the first authorized bank to receive a crypto license from the country’s central bank.



Last July, Coinbase was awarded Germany’s <a href="https://blog.coinbase.com/coinbase-secures-first-crypto-licence-in-germany-8a5207fbc03b" target="_blank" rel="noreferrer noopener">first crypto license</a>. A <a href="https://cms.blockworks.co/report-germany-is-the-most-crypto-friendly-country/" target="_blank" rel="noreferrer noopener">report by Coincub</a> last week ranked Germany as the most crypto-friendly country.



Added Morch: “These moves can be interpreted as the beginnings of a race within the traditional banking field to gain a competitive edge by being the first entity in its local market to offer crypto services.”



As a result, crypto adoption will increase, he believes, and it will be a mainstream financial service – instead of the “next big thing.”



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German Banking Giant’s Move into Crypto Highlights Growing Trend in Europe

Casey Wagner

<div id="highlights-block_6246209459c19" class="highlights">
 <ul>
 <li>The deal was likely called out for regulatory issues, but there could be other reasons, experts said</li>
 <li>In October, the Munich bank revealed plans to expand into crypto banking through a custody deal with Fireblocks</li>
 </ul>
 
</div>



Plans for BXM Operations AG, a company founded by BitMEX executives, to acquire German bank Bankhaus von der Heydt have fallen through, according to reports from <a href="https://finanz--szene-de.translate.goog/digital-banking/verkauf-des-bankhauses-von-der-heydt-gescheitert/?_x_tr_sl=auto&amp;_x_tr_tl=en&amp;_x_tr_hl=en-US&amp;_x_tr_pto=wapp" target="_blank" rel="noreferrer noopener">German media</a>.



Started by BitMEX CEO Alexander Höptner and Chief Financial Officer Stephan Lutz, the Germany-based company <a href="https://cms.blockworks.co/bitmex-execs-plan-to-acquire-one-of-germanys-oldest-banks/" target="_blank" rel="noreferrer noopener">first announced</a> the deal in January as part of BitMEX’s broader European expansion goals. Germany was seen as a particularly ideal location given the country’s business-friendly economy, said Lutz, who also serves as BMX Operations AG’s CFO.



“After further discussions between BXM Operations AG and the owner of Bankhaus von der Heydt, the two parties have mutually and amicably decided to discontinue the proposed acquisition,&#8221; a representative from BXM Operations said. &#8220;We look forward to sharing details of our future plans in due course.”



Representatives from BXM Operations declined to comment further. 



Experts say the failed acquisition is likely due to issues with the Federal Financial Supervisory Authority, better known as BaFin, which is the financial regulatory authority in Germany.



“The German regulator is strict and if all of the ducks weren&#8217;t lined up in a row, they&#8217;d reject,” said Michael Klena, managing director at Architect Partners, a mergers and acquisitions advisory firm. “The fact they called it off and did not delay it implies the BaFin wasn&#8217;t comfortable with BitMex/BMX Ops, and couldn&#8217;t get comfortable.”



BitMEX has faced regulatory troubles in the past. In October 2020, the cryptocurrency exchange and derivative trading platform was charged by the US Commodity Future Trading Commission (CFTC) for offering unauthorized trading services. BitMEX <a href="https://cms.blockworks.co/bitmex-agrees-to-settlement-up-to-100m-with-us-cftc-and-fincen/" target="_blank" rel="noreferrer noopener">later agreed</a> to a settlement with the CFTC and the Financial Crimes Enforcement Network (FinCEN) for $100 million.



There are still lingering issues with the situation, though, Klena pointed out.&nbsp;



“Very few regulators would approve anything until other regulatory matters are settled,” he added.&nbsp;



There could be other explanations for the fall through as well, Klena said, such as another bidder, but the deal was an uphill battle from the start.



“That was a surprising deal when it was announced and only the most trusted institutions could practically pull it off,” Eric Risley, managing partner at Architect Partners, said. “BitMEX does not fall into that category.”



Bankhaus von der Heydt has been digital asset-friendly for some time. In October, the Munich bank revealed plans to <a href="https://cms.blockworks.co/bankhaus-von-der-heydt-will-custody-crypto-with-fireblocks/" target="_blank" rel="noreferrer noopener">expand into crypto</a> banking through a custody deal with Fireblocks, becoming one of the first banks to offer crypto services in the region. In addition to custody, Bankhaus von der Heydt currently offers blockchain payments services.



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