Germany's DZ Bank launches crypto custody platform for institutional investors

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On November 2, DZ Bank, the third-largest bank in Germany, announced the launch of a digital assets custody platform for processing and safeguarding digital financial instruments on the blockchain. The bank has partnered with Swiss firm Metaco to manage its crypto services using Metaco’s custody technology platform, Harmonize.

The venture makes DZ Bank one of the first credit institutions to launch an offer for institutional customers based on blockchain technology. To implement the new custody solution, the bank has hired over a dozen employees across IT, operations, and compliance.

The digital custody platform, whose development began in 2022, will initially take crypto securities into custody, one of which is a crypto bond from Siemens. DZ Bank and Union Investment subscribed to these bonds six months ago, and they can now be transferred to self-custody.

DZ Bank had previously been a processor and custodian in the first external transaction of crypto fund shares from Bankhaus Metzler. Since both cases fall within the scope of the Electronic Securities Act (eWpG), it means custody is possible with the existing licences.

Additionally, DZ Bank’s existing infrastructure makes them well-positioned to actively participate in the European Central Bank’s (ECB) exploration phase. During this phase, the settlement of large-volume capital market transactions in central bank money is tested.

Commenting on the venture, Dr Holger Meffert, Head of Securities Services & Digital Custody at DZ Bank, said, “We assume that within the next ten years, a significant proportion of capital market business will be processed via distributed ledger technology (DLT)-based infrastructures. In the medium term, we see DLT as a complementary technology to the established infrastructures in the existing capital market processes.”

The bank is also working on a new feature that allows private customers to invest directly in crypto. The bank hopes to enable institutional investors to invest in cryptos like Bitcoin soon. To achieve this, DZ Bank applied for a crypto custody licence from the German Federal Financial Supervisory Authority (BaFin) in June 2023.

In addition to DZ Bank, two other major banks in Germany, Commerzbank and DekaBank, are seeking crypto custody licences from BaFin.

DZ Bank’s launch of a digital custody platform is a positive development for the crypto industry as a whole. It shows that banks are committed to providing secure and compliant custody solutions for digital assets.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash