BaFin License

BaFin License for Fintech Companies and Crypto Asset Service Providers

In most cases, fintech companies and crypto asset service providers require a BaFin license to operate their business model, depending on the type of service offered under MiCAR, the KWG, WpIG or even ZAG. Professional support is indispensable for the preparation of the required licensing procedure. Applicants applying for a license must, among other things, provide sufficient minimum regulatory capital, the amount of which depends on the type of regulated activity to be offered. In addition, the owners and the directors of the company must be fit and proper persons. Fintech companies and crypto asset service providers must also demonstrate 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 in the licensing procedure. BaFin places particular emphasis on appropriate and effective IT security in licensing procedures for fintech companies and crypto service providers.

Main Focus in Licensing Procedures for the BaFin License

The focus of BaFin’s review depends heavily on the specific regulated activity for which the applicant is applying for a BaFin license. Applications for licenses for banking activities such as deposit business, lending business or financial commission business require the fulfillment of different minimum standards than, for example, applications for authorization of payment services, even if the basic requirements to be fulfilled by applicants in licensing procedures under MiCAR, the KWG, WpIG and ZAG are essentially comparable. In any case, license applications require extremely careful preparation, which often takes several months. Therefore, the support of a good and experienced lawyer for the preparation of an application for a BaFin license is well worth it. In addition to structured support of the preparation and a high level of expertise with regard to the requirements that have to be fulfilled 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 in the company as prescribed by regulatory law.

Licensing for Crypto Custody and Crypto Securities Registry Management

In Germany, crypto custody and crypto securities registry management are regulated according to the KWG as financial services which require a BaFin license. Applicants must therefore comply with the statutory requirements of the KWG and the requirements according to the relevant administrative practice of BaFin in the licensing procedure. Both financial services are special in so far as 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 specialist departments that are responsible for both the licensing procedures of crypto custody and crypto securities registry providers as well as the subsequent ongoing supervision of these types of crypto asset service providers. In contrast, licensing procedures of crypto asset service providers with other business models, such as cryptotrading or investment advice on crypto assets, are generally handled by the BaFin departments that are also responsible for classic financial market-related business models.

The competent lawyer for questions regarding BaFin License in our law firm is Attorney Lutz Auffenberg, LL.M (London).