BaFin license and approval procedure

BaFin license and licensing procedure for fintech companies and crypto service providers

In most cases, fintech companies and crypto service providers require a BaFin license to operate their business model, depending on the type of service offered in accordance with MiCAR, KWG, WpIG or ZAG. Professional support from a specialized law firm is essential for the preparation of the required licensing procedure. Applicants applying for a BaFin license must, among other things, demonstrate sufficient regulatory minimum capital, the amount of which depends on the type of regulated activity to be offered. In addition, the owners of the company and the managers must be reliable and professionally suitable. Fintech companies and crypto service providers must also provide evidence of a proper and professional business organization. In particular, applicants must be able to demonstrate effective risk management and effective corporate compliance as well as a functioning anti-money laundering program and comprehensive emergency plans to BaFin during the licensing procedure. BaFin attaches particular importance to appropriate and effective IT security in licensing procedures for fintech companies and crypto service providers.

Main focus of BaFin license approval procedures

The focus of BaFin’s examination depends heavily on the specific regulated activity for which the applicant is applying for a license. Applications for a BaFin license for banking activities such as deposit-taking, lending or financial commission business require compliance with different minimum standards than applications for payment services, for example, even if the basic requirements to be met by applicants in licensing procedures under MiCAR, the KWG, WpIG and ZAG are essentially comparable. In any case, extremely careful preparation is required for license applications, which often takes several months. In this respect, the support of a good and experienced lawyer is worthwhile when preparing an application for a BaFin license. In addition to structured support for the preparation and a high level of specialist knowledge with regard to the requirements to be met in the licensing procedure by the lawyer, careful cooperation in the preparation is just as necessary on the part of the client as the consistent implementation of the business organization prescribed by supervisory law in the company.

BaFin authorization procedure for crypto custody and crypto securities register management

In Germany, crypto custody and crypto securities register management are regulated under the KWG as financial services requiring a license. Applicants must therefore meet the statutory requirements of the KWG and the requirements of the relevant administrative practice of BaFin in the licensing procedure. Both financial services are special in that they do not relate to all types of financial instruments. Rather, the object of the respective financial service can only be a crypto asset or a crypto security. BaFin has therefore established special departments that are responsible both for the licensing procedures for crypto custody and crypto securities register providers and for the subsequent ongoing supervision of this type of crypto service provider. In contrast, licensing procedures for crypto service providers with other business models, such as crypto trading or investment advice on crypto assets, are generally handled by the BaFin departments responsible for traditional financial market-related business models.

The lawyer responsible for issues relating to the BaFin license at our law firm is Lutz Auffenberg, LL.M (London).

info@fin-law.de