Uncategorized

German Bank Receives Regulatory Nod to Manage Digital Assets for Clients

The digital investment subsidiary of Hauck & Aufhäuser, one of Germany’s oldest banks, has obtained approval from the country’s regulatory watchdog to become a regulated crypto management company (KVG). 

Hauck & Aufhäuser Subsidiary Licensed to Manage Crypto Assets

According to a press release on Monday (February 14, 2022), Hauck & Aufhäuser Innovative Capital (HAIC) received the KVG license from BaFin earlier in February 2022. The approval allows HAIC to “set up and manage investment funds as special assets that invest in native crypto assets or add them to a classic portfolio allocation.”

Meanwhile, this is not the first time the German private bank is taking an interest in cryptocurrency. Back in December 2020, the Hauck & Aufhäuser subsidiary announced a partnership deal with Kapilendo, a Berlin-based fintech company, to launch a crypto fund in January 2021.

The fund, called HAIC Digital Asset Fund I, focuses on three crypto assets namely Bitcoin (BTC), Ether (ETH), and Stellar (XLM). Also, HAIC Digital Asset Fund I is open to institutional and semi-institutional investors, with the minimum entry point set at €200,000 ($226,230).

The latest development shows how Germany’s rules fosters such cryptocurrency adoption. Back in March 2020, BaFin classified cryptocurrencies as financial instruments. Later in July 2021, German legislators passed the Fund Allocation Act, which allowed institutional funds to Allocate 20% of their portfolio in cryptocurrency. 

Commenting on the new license, a member of the management board at Hauck Aufhäuser Lamp, Dr. Holger Sepp, said:

“With our KVG for digital assets, we are planning the launch and management of our own digital asset funds, but as a master KVG we also want to be available to fund initiators and asset managers as a service partner for their fund products.” 

Sepp added:

“In the future, we will be able to offer the entire range of services for digital asset investment products from a single source, starting with portfolio management, KVG services and fund administration through to custody and the custodian.”

More Banks Embracing the Crypto Industry

With the growing popularity and maturity of the cryptocurrency industry, more financial institutions are delving into the sector, following demands from clients. The interest in the burgeoning sector from banks is in contrast to earlier negative sentiments held by these institutions. 

Vast Bank, which completed an end-to-end crypto transaction in collaboration with major cryptocurrency exchange Coinbase, unveiled its crypto banking services for U.S.-based customers in August 2021.

Investment banking giant Morgan Stanley in March 2021, became the first major U.S. bank to offer clients access to Bitcoin funds. According to reports, the BTC funds would only be available to its wealthy clients due to bitcoin’s volatile nature. 

Several banks in the United States have either launched or are planning to establish crypto custody services. U.S. Bank partnered with digital asset management firm New York Digital Investment Group (NYDIG) in October to offer cryptocurrency custody services to institutional clients. 

Northern Trust and Standard Chartered collaborated to offer the similar services for institutional investors. Others include Bank of New York Mellon (BNY Mellon), and CitiBank.