Regulatory clarity could ease traditional financial institutions’ skepticism about the soundness of digital assets and revive partnerships between banks and crypto brokers after years of tension.
The collapse of the FTX crypto exchange in 2022 hit a brick wall for the industry, while the collapse of crypto-friendly US banks Silicon Valley Bank and Signature Bank the following year added further uncertainty to the market.
However, with new regulations coming into force, banks appear to be returning to the market.
New rules on stablecoins, part of the EU’s landmark cryptocurrency market regulation, came into force this month. The new framework places significant restrictions on the use of dollar-denominated stablecoins within the EU and is the latest update to the cryptocurrency framework since the regulation was first announced in May 2023.
As EU regulators tighten restrictions on the crypto space, some banks are testing the waters by initiating crypto partnerships with trusted brokers. As part of this trend, Deutsche Bank announced last month that it was expanding its partnership with Austrian fintech unicorn and cryptocurrency exchange Bitpanda to provide access to German IBANs and real-time payment solutions.
The move will allow German customers to deposit and withdraw fiat currency from Bitpanda through their Deutsche Bank accounts, something other major financial institutions have previously restricted: In September, the UK unit of JPMorgan’s retail bank Chase barred its customers from trading cryptocurrencies over fraud and money laundering concerns.
Deutsche Bank told The Banker that its partnership with Bitpanda is part of its efforts to better engage with “emerging clients” in the crypto-asset space, but that the bank is taking a “cautious and measured” approach to partnering with these providers.
“In cases like our partnership with Bitpanda, we are not involved in any cryptocurrency transfers, but rather help clients efficiently deposit and withdraw funds from their investment portfolios and support Bitpanda’s treasury and payment reconciliation processes,” said Vedran Jankovic, head of sales for crypto asset service providers at Deutsche Bank.
But while traditional banks are slowly moving towards crypto adoption, a number of non-banks and neobanks have already established themselves in the industry. Earlier this month, UAE digital bank Zand partnered with Taurus, a digital asset technology provider for banks, to use the company’s services to support its digital asset infrastructure, including custody, tokenization and blockchain connectivity.
Bitpanda deputy CEO and COO Lukas Enzersdorfer Conrad said that growing institutional adoption of digital currencies and the introduction of new regulatory regimes are leading more established institutions to seek “new revenue-generating areas” in crypto.
“As blockchain technology becomes more widely adopted across society, more and more banks are reaching out to companies like us to find ways to offer this crypto asset class to their clients,” Enzersdorfer-Conrad said.
In June, US exchange-traded fund Bito announced a new partnership with Taiwan’s Far Eastern International Bank to launch what is said to be the world’s first bank accounts tailored to crypto users. Germany’s largest federal bank, LBBW, announced in April that it would launch crypto custody services through a partnership with Bitpanda.
Additionally, Enzersdorfer Conrad said the MICA regulation also encourages the creation of partnerships between banks and crypto brokers, and believes that more banks will start offering cryptocurrencies as an asset class to their clients in the coming years.
“Mica is a catalyst for the European financial services industry in general, which is now focusing on how to adopt cryptocurrencies and I think we will see new use cases emerge not just in Germany but across Europe,” he says.
