European banks have been typically reluctant to offer services around cryptoassets. Now many are entering the unchartered waters
The banking behemoths of Europe have followed one another into recession.
Even before Covid-19 burst onto the scene, each faced severe headwinds in the form of Brexit, a global slowdown and the US-China trade war. That now pales into comparison with what the IMF says has been “a rare disaster, a crisis like no other, and the worst economic downturn since the Great Depression”.
And at the same time, another trend rises: regulatory clarity promising a new surge in cryptobanking growth.
Germany is facing its steepest recession since the end of World War Two. That’s the assessment of the country’s Economy Minister Peter Altmaier, quoted in Reuters in May.
The EU hub began allowing its banks to trade and custody cryptoassets in November 2019.
At the time, the Bundesrat Parliament negotiated a rare moment of clarity to boost its commercial efficacy and offer a new source of revenue at a time of stark economic downturn.
Market regulator BaFin closed applications for provisional licenses on 31 March 2020, with the deadline for full licenses due on 30 November 2020.
Market analyst Sven Hildebrandt was quoted in German broadsheet Handelsblatt offering praise to the German legislature for “playing a pioneering role in the regulation of crypto storage”.
It could hardly have come at better time for the world’s fourth-largest economy.
Investors are finding fewer and fewer places to put their money to earn capital growth. At least 100 banks now charge negative interest on deposits, while the government throws another $130bn stimulus package at the wall to see what sticks. As a result, at Copper, we are seeing more investment managers looking to alternative investment avenues, such as actively managed certificates that can be created and launched through Copper Catalyst.
Across Europe, Asia, South America and the United States, traditional banks have been reluctant to engage crypto businesses given the wide regulatory inconsistencies between markets and fears over money laundering.
Time and again we have seen banks deny companies accounts and proper service, only to be overturned by the country’s legislature.
Even crypto titan Coinbase was not immune, losing its first major banking service from Barclays back in August 2019. But the tide has now turned.
Throughout the coronavirus pandemic Germany and its neighbour to the south Switzerland have been divided by concrete fences and barrier tapes.
But the two countries now have much more in common than ever. Not only are the Swiss facing an economic depression the likes of which few of the younger generation will recall.
But its famed banking system — almost as long-revered as the cuckoo clock — is now throwing open its doors to cryptoassets.
Institution-focused Maerki Baumann is the latest FINMA-registered private bank to gain regulatory acceptance. It follows Swiss B2B banking services group InCore on 29 May 2020 in winning the regulator’s say-so to trade, custody, transfer and tokenise digital assets.
In a section titled: ‘Uniting the old and the new world’, InCore write: “As digital assets, cryptocurrencies are a valuable extension of modern asset management and will become an indispensable payment and investment value in the future.
“In addition, other, previously “non-bankable” assets can also be represented as digital assets by means of security tokens. As this area will increase enormously in importance, InCore Bank is proud to play a pioneering role in this field.”
It has always been the case that while frail empires fall, others grow to replace them. As Europe’s banking core, this is happening before our eyes.