In a joint product, Tangany’s technical strength is combined with CM-Equity’s experience as a digital asset manager with market access to the largest digital asset markets in the world.

The product “CM-EQUITY | TANGANY” combines the capabilities of both cooperation partners and enables professional investors to access digital assets on their own or by outsourcing to CM-Equity. The digital assets are thereby held in custody with the highest possible security. CM-Equity has been supporting clients with investments in various asset classes for almost two decades and, as a regulated institution, brings the necessary expertise to make cryptocurrencies as well as security tokens accessible to this target group.

Tangany is a German crypto custodian whose service has been used by companies and institutions for various use cases as a white-label solution since 2018. The company has also been a regulated financial services institution since 2020. Tangany’s technology makes it easy and secure to interact with the blockchain and crypto assets. Be it for the safekeeping of cryptocurrencies such as Bitcoin or also for the issuance of so-called security tokens.

Customers can thus take advantage of an all-round carefree package: a high-quality infrastructure through complementary partners, as well as a flexible and individual product solution to invest in and manage crypto assets.

The symbiosis of both services is obvious for Michael Kott, CEO of CM-Equity AG: “Together with Tangany, we have a first-class product in a market where more and more market participants are interested in investing in crypto assets and recognize the potential behind it as a new asset class for portfolio addition. Our partnership offers everything from one source, Made in Germany.”

Martin Kreitmair, Managing Director of Tangany GmbH, adds: “CM-Equity positioned itself in the crypto market early on and is one of the best-known addresses in Germany. As a white label provider, we feel comfortable as a technical expert in the background. This harmonizes perfectly with CM-Equity’s strengths and enables the partnership to take over market leadership in Germany in a timely manner.”

At the start of the cooperation, our infrastructure solution has already convinced the first customers to entrust us with the custody of crypto assets in the 8-digit euro volume. Customers are free to choose whether to store their crypto assets in a highly available warm wallet or in a highly secure cold wallet.

About CM-Equity AG

CM-Equity is a 19 years young financial institution from Munich, regulated according to §32 KWG. Early on, CM-Equity has been a pioneer in the field of digital asset management. With a fully licensed, interfaced capital market infrastructure platform for digital assets for companies, FinTechs and investors, CM-Equity has become one of the most sought-after players in the digital asset market in Germany and Europe. The company aims to make the new digital capital markets 4.0 accessible to all, offering innovative and regulatory compliant access to the most liquid trading venues while providing the most secure custody.

Contact CM-Equity

https://cm-equity.de/kryptoverwahrung/
Philipp Hartmannsgruber, hartmannsgruber@cm-equity.de , +49 (0)173 6883866

About Tangany GmbH

Tangany is a white label custodian for digital assets such as Bitcoin, Ethereum, and Security Tokens. This service has been offered since 2018 at the highest technical level and always in compliance with the regulation. Tangany specializes in finance, tokenization, and crypto markets. The company was recently awarded the prestigious FinTech Germany Award 2020.

Contact Tangany

https://tangany.com

Martin Kreitmair, martin.kreitmair@tangany.com , +49 (0)89 9982095-73

With this new release, we are expanding WaaS’s capabilities to interact with Ethereum smart contracts and also introduce several quality-of-life upgrades for our supported Blockchains. For this new feature set, we have put a focus on streamlining the WaaS developing experience as well as improving the overall accessibility to our expanding Tangany ecosystem.

Check everything the new and updated below and let us always know on what features we should work next.

Sweep Bitcoin wallets

The Bitcoin sweeping endpoint available via POST /btc/wallet/:wallet/sweep-async can be used to transfer all confirmed coins from a wallet to an arbitrary Bitcoin address. This endpoint also takes into account any fees that occur during the transaction and handles edge cases with unconfirmed UTXOs.

Unconfirmed coins from e.g. pending transactions are normally not swept due to their only recent inclusion to the blockchain. To enforce sweeping unconfirmed coins as well, the request configuration header tangany-bitcoin-tx-confirmations needs to be set to none.

Call Ethereum Smart Contract methods

In a past release we have introduced the universal Ethereum smart contract endpoint POST eth/contract/:contract/:wallet/send-async that supports executing blockchain state altering contract methods (“write” access).

Suitably in addition we are introducing multiple endpoints to call “read-only” smart contract methods. The general contract call endpoint POST /eth/contract/:contract/call features an ABI-like configuration in the request body that makes it very easy to interact with a smart contract.

Verifying the approved allowance via ABI call on our ERC20 test token

The wallet-based contract call endpoint POST /eth/contract/:contract/:wallet/call works similarly but sets the msg.sender variable of the underlying ABI call to the route’s :wallet address. Contract functions that rely on msg.sender benefit greatly from this call type.

At last GET /eth/contract/:contract/call/:method and GET /eth/contract/:contract/:wallet/call/:method are convenience endpoints designed to quickly access basic smart contract data. Both routes call the smart contract :method in a predefined fashion. While the first route does not pass any arguments to the method call, its wallet-based variant does set msg.sender to the route’s :wallet address and automatically resolves the wallet address as the method’s first address type argument. Use this route to e.g. quickly get ERC20 balances for WaaS wallets:

The default response type for both convenience routes is `uint256`

The response type can be adjusted via the optional ?typequery parameter with a valid solidity data type. The response type defaults to uint256.

Accessing string type data call. With the default type the value would be “32”

Execute payable Smart Contract methods

To execute payable functions in a smart contract, the transaction is required to be accommodated by some Ether funding the method call. This is now supported in the POST /eth/contract/:contract/:wallet/send-async endpoint utilizing the optional amount body parameter.

Use wallet names in request body

In addition to the established WaaS workflow for sending funds to Blockchain addresses, it is now possible to directly send transactions to known Tangany wallets of the current tangany-vault-url Key Vault using the body argument wallet.

In the past, when trying to send Ether to an arbitrary recipient wallet my-wallet it was required to resolve the Ethereum address of my-wallet in a separate call

.. and then copy the address to the transaction route:

Using the new wallet body argument it is now possible to complete the same transaction in a single API call:

The “my-wallet” blockchain address of the current Key Vault is automatically resolved based on a current Key Vault

The simultaneous usage of the wallet and to parameters are supported for verification purposes. If a mismatch between both recipient types is encountered the request is rejected with matching error:

The “to” address must match the resolved address for the “wallet” argument

The wallet JSON body parameter is supported extensively throughout the API:

In our upcoming post, we will explore possibilities utilizing the wallet parameter as a custom Solidity type using our universal smart contract endpoint POST eth/contract/:contract/:wallet/send-async

Other notable changes

All notable changes are also curated in our public changelog and can be referenced in our public API documentation. Get started using WaaS 1.6 in minutes with our handy Postman collection

We plan to update our official SDKs to support WaaS 1.6 mid-august as our JavaScript SDK recently went out of beta state with the introduction of WaaS 1.5 support last week.

Keep your eyes peeled on our social activity to stay informed about all-things Tangany and always stay safe through these troubled times!

Highlights

Until now, Tangany Custody Suite was mainly focused on write access to blockchains. That included the creation of new wallets and the execution of transactions and smart contract interactions. With the release of 1.5, we add the complementary read functionality to it.

The Read API allows all clients and partners to easily read the transaction and event history of wallets and smart contracts on Ethereum. With that, the solution supports all major types of interaction with blockchain using one unified API solution.

Please note, although demo account users can test-drive the Read endpoints without restrictions, due to its limited release status for productive workload paid-accounts are required to opt-in to this Beta feature by contacting the Tangany Support Team

Added

Changed

Fixed

The development of a white-label blockchain custody solution is a very challenging mission. It requires to tackle large amounts of different topics such as stability, usability, security, regulation, and scalability. Tangany’s mission is to address all those challenges in order to create a stunning and highly usable product.

This blog article will give you detailed overview for all technical topics.

Stability

These goals come with the need for numberless tasks to fulfill our promise. For stability, we run hundreds of automated tests every day. Testing all corners of our product for proper functionalities. The KPI behind that approach is measured as ‘code coverage’. Code coverage describes the percentage’s value of how our solution is monitored by all the different tests. We aim for at least 99% and that is exactly where our KPI is pointing at. This guarantees that the solution is fully and continuously tested to ensure flawless execution.

Scalability

As our product suite is designed as Software as a Service, this generally comes with the ability of high scalability. This is what we had in mind when the product was initially conceived. We asked ourselves, how do the engines need to work so that we are able to maintain best-in-class stability and reliability. That is exactly why we decided to move into cloud resources with a serverless approach. We avoid bottlenecks at all times. We ensured that no matter whether one or hundreds of clients are using the service parallel, the response times are always the same.

For that, our product is able to automatically scale up and down upon requirement. This includes additional nodes of blockchains like Bitcoin and Ethereum.

Not too long ago a client requested to create more than 20,000 wallets for his users in bulk. Bulk means in parallel and as fast as possible. Even for our engines quite a lot of work. Yet, all those 20,000 wallets were successfully created in no more than two days. And all other clients didn’t notice a thing as the system was stable at all times.

Security

IT Security is a very sensitive aspect. Our security protocols include a very strong IT security paper with two digits amount of pages. It covers not only technical but also organizational and processual aspects in accordance with regulatory requirements. It highly origins from ISO 27001.

We also work closely with external partners to regularly validate security from outside and to have a strong security plan in place for all scenarios.

Usability

Usability comes with simplicity. Both, our API and our white-label wallet are designed with ease-of-use in mind. We also take care of as many technical requirements as possible. Ethereum for one struggles with the network fees if you try to send only tokens or if you try to send a large number of transactions from one wallet in a short time (the so-called ‘nonce issue’). Bitcoin, on the other hand, is quite limited with features and requires the sender of a transaction to collect the desired amount of Bitcoins manually.

All those obstacles are targeted by our tech team to provide a solution for our clients. They often don’t even know that we take care of such things in the background. That is exactly what usability means to us.

Reliability

Only if we perform on all named topics, we are able to provide reliability. Reliability sums everything up and defines the quality of products.

In more detail: we regularly test our solution against a group of peer products with similar functionalities (blockchain transactions, creation of wallets, etc.). We won’t spoil the peer results for reasons of objectivity. Hence, we will focus on our own values in those tests.

Transaction Speed

How long does it take to receive the request for a transaction (sender, recipient, amount, type of token/coin), to create it, to get it signed with the associated private key and to submit it via node to the regarding blockchain?

Well, no longer than 1.5 seconds on average for Ethereum and even fewer for Bitcoin with 1.1 seconds. That is the lowest value of all tested solutions.

We have – obviously – to keep in mind that it takes also some time for the blockchain to execute the transaction by mining it into a block. For Bitcoin, this can be up to 10 minutes and for Ethereum up to 12 seconds. However, this is outside of our influence and needs to be optimized in the blockchains itself.

Large Amount of Transactions in a Short Time Period

There is one tricky thing about Ethereum, called ‘nonce’. Every transaction gets its unique nonce which is executed chronologically. Now, what happens if a wallet sends – let’s say – 30 transactions within seconds while Ethereum only creates new blocks all 12 seconds? Well, that is a good question and exactly what we have tested.

The aim was a rate of 100% successfully executed transactions. And besides, that we saw quite concerning results for the peer group, our engine management to deliver. All 30 transactions were mined on the blockchain.

Bitcoin Wallets with a large History

That was quite challenging and required a lot of time, fruits, and discussions. Bitcoin has this little feature that requires you to manually construct a transaction. It’s like having a wallet for cash and every time you pay with it, the change will be put into a new wallet. Now let’s think this through with hundreds or even thousand cash payments: that is a very large number of wallets. And you have to decide which of those wallets are used for the next payment. This can drive algorithms definitely nuts!

So we tested wallets with more than 5,000 transactions in history. That is enough even for highly used wallets. By the way, our initial algorithm fully stopped working with wallets that had 300 transactions. However, our latest algorithm works stable even with 5,000 transactions in history. And the response time is still quite impressive with about 3.5 seconds.

Conclusion

We tested a lot of scenarios and will do so in the future. Reliability is not just a word to be claimed. It’s a mission that enforces an organization to fully dedicate itself to it. Many things need to be done and some are even contrary to each other. We at Tangany align our processes and streamline all new updates and features to it. All for client satisfaction.

Traditionally the Ethereum ecosystem requires a native currency (“Ether”) to participate in smart contract transactions – that is e.g. exchanging Ethereum Tokens such as ERC20 or ERC721. Requiring wallet holders to obtain cryptocurrency in order to trade cryptocurrencies is a bad user experience for many Ethereum users and is a well known hampering factor for broader Ethereum adoption. While multiple approaches exist aiming to circumvent this problem, often they require complex infrastructure migrations and redeployment of established smart contracts possibly disrupting the user base.

With WaaS 1.4 we introduced an elegant turnkey solution that eliminates these inconveniences while honoring existing smart contract business logic. Our WaaS Gas Tank enables participating wallets sending Ethereum transactions without the requirement of actually holding any Ether balance by transparently pre-funding the mandatory transaction fees to the sending entity from our centrally managed Ether tank.

Using the Gas Tank in a WaaS transaction is enabled by simply adding the HTTP header tangany-use-gas-tank=true to any asynchronous Ethereum API endpoint request (e.g. POST eth/contract/:contract/:wallet/send-async).

The amount of Ether required to fund an outgoing transaction is based on the amount of gas (so to speak “CPU units”) the transaction is going to use up during its execution multiplied by the gas price (amount of Ether the sending wallet is willing to spend per gas unit). The required amount of gas for a transaction is estimated automatically by WaaS during the API call. The gas price is either pre-set via the optional tangany-ethereum-speed header or defined manually using the tangany-ethereum-gas-price header.

Once the transaction with the requested fee has arrived at the sending wallet, WaaS proceeds to transmit the original transaction to the Ethereum network using the pre-funded budget to pay for the transaction.

Most of the times the smart contract transaction completely consumes the pre-funded amount. In some edge cases, a smart contract transaction may not exhaust 100% of the estimated gas amount. Consequently, a fraction of the pre-funded Ether amount would be added to the wallet’s total balance. Since the pre-funded amount is based on an initial gas estimation for the smart contract, a non-deterministic smart contract may not be compatible with Gas Tank usage. To ensure compatibility with WaaS Gas Tank it is required that an Ethereum smart contract method always behaves the same on each request given the same input.

Ready to give it a spin? Book your free WaaS sandbox account and get started with the Tangany Gas Tank with our handy Postman collection in minutes.

In the last months, we were busy developing many exciting features that we are releasing today with API 1.4.

This post will give a basic overview of all changes introduced in our new update. In the following days, we are planning on publishing a series of blog posts that will explain the functionality in greater detail.

Asynchronous Requests

We have integrated support for asynchronous API endpoints to provide a technical base for advanced blockchain workflows such as ethereum gas pre-funding. Sending a request to an asynchronous endpoint always results in a quick API response containing the status location of the asynchronous process. After a quick validation, WaaS enqueues the API request to be processed in the background and continues to update the corresponding status endpoint GET request/:id throughout the lifetime of the background process.

Currently supported asynchronous endpoints are POST eth/wallet/:wallet/send-async and POST eth/contract/:contract/:wallet/send-async.

Ethereum Gas Tank

We added a new configuration setting tangany-use-gas-tank that will cause automatic pre-funding of mandatory ethereum transaction fees to the tx-initiating wallet for all participating WaaS subscriptions. This feature enables wallets to interact with smart contracts such as ERC-standardized tokens on public ethereum networks without the necessity of holding any actual Ether balance.

Both POST eth/wallet/:wallet/send-async and POST eth/contract/:contract/:wallet/send-async support the Gas Tank HTTP header.

Universal Ethereum Smart Contract Writing

In addition to the already existing option to execute arbitrary write-access smart contract methods employing the data field via POST eth/wallet/:wallet/send and POST eth/wallet/:wallet/send-async, we added the new endpoint POST eth/contract/:contract/:wallet/send-async, that supports calling write-access smart contract methods using an ABI-like body configuration.

While the data approach does require the body smart contract method and the supplied arguments to be encoded into a hexadecimal string, this new endpoint accepts the desired method and arguments in a simple, human-readable syntax.

An additional API endpoint for calling read-access smart contract methods will be added in a future release.

Signing API

Both the ethereum and bitcoin signing endpoints POST eth/wallet/:wallet/sign and POST btc/wallet/:wallet/sign are now generally available for creating valid, signed transaction hashes that can be manually transmitted to compatible blockchain networks at a later stage. The ethereum signing endpoint is compatible with the custom RPC node customization header tangany-ethereum-network and enables users of ethereum RPC-compatible networks to benefit from Tangany custody services using private node infrastructure.

Miscellaneous Changes

The High-Tech-Gründerfonds invests with well-known business angels in the Munich company Tangany. The startup offers a reliable blockchain crypto storage solution for companies. This includes the secure management of wallets in a kind of digital safe (so-called hardware security module) and the simple use and communication with various blockchains such as Ethereum, Bitcoin or the customer’s own blockchain. The solution can be integrated into any system using an interface (API). Alternatively, a white-label wallet solution can be used.

Managing Director Martin Kreitmair proudly said about the closed investment round: “We did not rush the investment, but specifically looked for high-quality partners. Since we were already profitable in 2019, we had no financial pressure and carefully considered who we would bring on board as an investor.

Tangany serves companies from across the EU and beyond. Due to the open positioning, the technology can be used in all industries. As a result, Tangany was already able to attract numerous companies as customers in 2019 who use a total of over 15,000 blockchain wallets. The great acceptance in the market has enabled Tangany to work profitably from the start and to close with a profit in 2019.

We were particularly impressed by the combination of the founder’s technological and regulatory expertise. We see Tangany as an important Software Service provider to make blockchain applications useable” says Tobias Schulz Senior Investment Manager at HTGF.

In addition to pure capital, each of the new partners brings valuable expertise. The additional capital is intended to accelerate customer growth, enable the further development of the technology and support the application for the German ‘crypto storage license’ with BaFin, in accordance with the Money Laundering Act. In addition, an infrastructure was created to support upcoming technologies such as the digital euro on blockchain in order to be able to offer banks and companies a functional solution.

Together with the HTGF, the business angels Alex Suarez (CEO of Valchain AG), Philipp Treuner (former manager at Commerzbank GmbH) and Stefan Schindler (former CTO of Genesis Mining) are participating in Tangany. This gives the startup important know-how in the field of regulation and IT security.

About Tangany GmbH

Tangany GmbH offers a reliable custody solution for digital assets on blockchain. The founding team, consisting of the successful intrapreneurs Martin Kreitmair, Christopher Zapf and Alexey Utin, was supported in 2018 by the EXIST grant in the field of deep-tech. This ultimately resulted in the establishment of Tangany GmbH in January 2019 with the launch of the custody solution. The company addresses customers across the EU and beyond who want to work with blockchain.

About High-Tech Gründerfonds

High-Tech Gründerfonds (HTGF) is a seed investor that finances high-potential, tech-driven start-ups. With around EUR 900 million in total investment volume across three funds and an international network of partners, HTGF has already helped forge almost 600 start-ups since 2005. Driven by their expertise, entrepreneurial spirit and passion, its team of experienced investment managers and startup experts help guide the development of young companies. HTGF’s focus is on high-tech start-ups in the fields of digital business models, industrial technology, life sciences, chemistry and related business areas. To date, external investors have injected over EUR 2.4 billion into the HTGF portfolio via more than 1,500 follow-on financing rounds. HTGF has also successfully sold interests in more than 100 companies.

Investors in this public-private partnership include the Federal Ministry for Economic Affairs and Energy, KfW Capital, and Fraunhofer-Gesellschaft e.V., as well as the companies ALTANA, BASF, BAYER, B.Braun, Boehringer Ingelheim, Robert Bosch, BÜFA, CEWE, Deutsche Post DHL, Dräger, Drillisch AG, EVONIK, EWE AG, FOND OF, Haniel, Hettich, Knauf, Körber, LANXESS, media + more venture Beteiligungs GmbH & Co. KG, PHOENIX CONTACT, Postbank, QIAGEN, RWE Generation SE, SAP, Schufa, Schwarz Gruppe, STIHL, Thüga, Vector Informatik, WACKER and Wilh. Werhahn KG.


We updated WaaS to version 1.3 featuring improvements targeting our customers demands as well as introducing many under the hood enhancements to our service.

WaaS is following the semantic versioning specification. The new release contains no breaking changes to the previous versions hence no modifications to existing implementations are required for our customers to continue using our service.

Please find the highlights of the release below.

Release Notes 1.3

Refer to our updated documentation for more details on the updated topics. We wish all our customers a pleasant festive season and a successful start for the next year. 

If you have any questions or features requests feel free to reach out to our team at info@tangany.com.

The obstacles of Blockchain

Blockchain might be one of the most discussed technologies in recent years. The technology has experienced a tremendous growth over the years and reaches not only into science but politic, economic and society on a global scale. However, that should not delude over the fact that the technology itself has not yet fully matured. There is still a long way to go to become an essential digital layer.

Private Keys are for sure one of the most tricky parts. Either way the users have to manage it or the developer of the application takes the responsibility, usually a company. Taking the first approach applications are often very hard to use and require some basic understanding of cryptography.

For great user experience, the private keys along with the Blockchain itself need to move into the background. This leads unavoidably to challenges like how to create transactions, how to set up and maintain nodes and how should everything be designed in order to be secure. A lot of tasks, challenges and unanswered questions. And that does not even touch the regulatory aspects when wallets are created for users in an STO.

Tangany’s Solution: Full-Tech Custody Infrastructure

Tangany is a German-based technology company that provides clients a full-tech custody infrastructure to leverage Blockchain. Always with the goal of the clients in mind: the creation of a successful Blockchain use case.

For that, we are focused on usability and security. Our technical solution to store private keys and wallets is state-of-the-art and includes in its core a FIPS140-2 certified HSM (Hardware Security Module). All our clients are assigned to their unique custody KeyVault.

The HSM is covered by a sophisticated security architecture designed by our experts. Everything can be managed via our API which allows seamless integration into any application. A true integration in the background of the client’s software. The only way to enable best-in-class usability. Users (e.g. investors) don’t require any Blockchain knowledge. It’s in the background, it’s invisible.

Tangany handles the complexity of Blockchain fully automated and highly reliable. That includes the node infrastructure to Blockchains like Bitcoin or Ethereum, even the support of Private Blockchains. Transactions are created with our self-developed algorithm for the highest possible efficiency. Ethereum token transactions are even empowered with the needed Gas automatically by using our Gas Tank.

Blockchain Crypto Custody Regulation in Germany and the EU

Regulation on Blockchain tightens globally. The European Union has released a guideline to its member-states to include Blockchain into Anti-Money-Laundry (AML) activities. Blockchain has arrived in the regulated world of economic.

Most of the EU states implemented the regulation into national law by creating registries for Blockchain companies that offer custodian services. However, there are a few nations like Germany that have chosen a more strict approach. From January 2020 there will be a new license for custodian service providers (“Kryptoverwahrer”).

All providers, which store and manage private keys for clients in order to hold crypto assets, are required to obtain that license. This specifically includes even foreign providers.

We at Tangany are already in talks with regulators. As an active market participant in 2019, we benefit from the grandfathering ruling which allows us to continue our service in 2020 without any interruption. Even before we have the approval for the license.

Regulatory safety is key for our clients and for ourselves. We might be able to provide the regulatory umbrella for other custodians that want to do business in Germany or the EU, just drop us a note on https://tangany.com if you want to know more.

A holistic solution for STO

A lot stuff to care about, right? With Tangany’s Custody Infrastructure (see more at tangany.com) you are perfectly covered. In case a client does not only need the pure API to build applications but also a ready-to-use front-end solution, we have also something in store.

Our Whitelabel Wallet solution can be used to kickstart projects. It’s a fully functional wallet solution that enables projects to onboard users/investors. Those are able to buy the client’s token and might be able to create transactions (depending on the client’s desired restrictions). The solution is connected via API to the Tangany main product.

Here are a few visualizations of how it can look like, starting with the plain wallet overview. For customization purposes, elements are easily replaceable with the client’s CI:

A feature to send a transaction without any hassles:

In the end, it’s up to the client how the wallet should look like. The wallet can manage Bitcoin, Tether, Ether and all kinds of ERC tokens (e.g. ERC20, ERC1594) or just simply the client’s own token (remember the mentioned Gas Tank to empower transactions even without Ether on the wallet).

While the front-end solution is used for the initial token sale, most of the projects are integrating our API into their application in parallel.

We at Tangany have collected quite a lot of experience with use cases like tokenization of real estate, video games, certificates and much more. By following all those projects we have a large ecosystem of services that are complementary. That includes token issuing services like tokeny (Luxembourg) and SHIFT (USA) or legal advice and marketing services.

Tangany in numbers

Tangany has more than 6,000 wallets under custody. That is something we are very proud of! One of our non-disclosed clients has more than 3,000 users who have participated in the token sale in just a couple of weeks.

As the year 2019 is coming to an end, we are thrilled for 2020 with many more features to come. Let us handle the complexity of Blockchain for your success.

EU 5th AML (Anti-Money-Laundry) Directive

Blockchain is about to be anchored within regulatory laws in the European Union. It’s body the European Commission released a directive which aims to prevent money laundering and has now – for the first time – included Blockchain activities. That’s for one a huge step forward and some kind of acknowledge that Blockchain is relevant and it is here to stay.

However, this new directive must be transformed into national law by all EU member states (and closely-connected 3rd party nations). With that, the door for non-consistent laws between the nations has been opened which stands in direct contrast to another goal of the EU: the digital domestic market.

Regulatory fragmentation – Germany

Germany, for one, is about to over-regulate in terms of what was expected. As the bill has not yet been passed by lawmakers, there is still room for changes and adjustments. Hence, this article describes the foreseeable impact of the law which is mostly referred to as the 5th AML directive or the 5th Anti-Money-Laundry Directive. What does this mean for companies that want to leverage Blockchain technology and to target the German market.

PLEASE NOTE THAT THIS IS NOT LEGAL ADVICE AND ONLY REFLECTS THE OPINION OF OUR TEAM

Is there some kind of license that requires permission?

As of now, the German jurisdiction is about to set up a new kind of license which is called custodian service provider (“Kryptoverwahrgeschäft”) and concerns all businesses, that hold or manage Blockchain Private Keys for third parties, and those keys have to be assigned with crypto assets (“Kryptowerte”), which are basically all cryptocurrencies which have a value and are tradeable. Although that might be a huge simplification yet it summarizes the essence of the bill.

This license can be applied for at BaFin (German finance authority).

I am based outside of Germany, do I still need the license?

It is most likely that it doesn’t matter where a business is located. All entities, that are qualified to hold the license (custodian service provider that holds crypto assets) and target the German market (e.g. by having German customers) are obligated for the license. Even if the business provider is not located in the EU.

There are discussions about whether passporting might be applicable or not within the EU. That way, a business which is regulated in another member state could offer their services within the whole EU. However, as Germany is about to create a unique license it is unlikely that passporting can be applied.

Does it differentiate between Utility and Security tokens?

Most likely no. There is no difference between utility, currency or security tokens. As long as they are classified as crypto-assets (“Kryptowerte”), this license is qualified (well, in case that all the other checkmarks are also checked).

If a Private Blockchain is used and the created tokens can’t be traded, this could be a non-crypto-asset. However, it is sufficient to run a small website where that tokens can be bought or sold to count as ‘tradeable’.

What is the time frame of the 5th AML directive?

The EU has set the deadline on the 10th of January 2020. From there on all obligations in terms of KYC and AML shall be implemented within the business activities.

It is expected – and planned – to add a transitional period for the license that could be extended until June 2020. Note that this will only concern the license not the directive itself.

Is it easy to apply for the license?

There are clear requirements for businesses that want to apply for the license. This includes qualified managing directors with strong experiences in the relevant fields. It will also be mandatory to have capital of at least 125,000 Euro, which can freely be used and is without any debts. It is also expected that the business needs a physical office within Germany.

There are many more documents and certificates needed such as a business plan or personal certificates. Don’t expect it to be a 100 meters run but rather a marathon.

How long will it take to acquire the license?

This is subject to be determined. It will surely take some months from start to the end.

Is there any way around this?

First of all: no! If you are committed to applying for the license, there is no way around. However, if you have a partner that holds already the license there might be a contractual solution. Tangany for one is about to apply for the license which could be the easiest and most elegant solution for foreign (and also domestic) businesses to comply with the regulation.

Tangany offers a custody infrastructure solution for companies which includes the safe (HSM-secured) storage of private keys with programmable wallets by a connected API. Hence, we are about to be regulated like stated before and aim to provide our clients with not only a technical solution to work with Blockchain but also a regulatory compliant one.

What should be the next step?

If you are using Blockchain – not matter whether it is Bitcoin, Ethereum or an own token – and you manage the Private Keys for your customers, you should start right away to deal with the 5th AML Directive (“5. Geldwäscherichtlinie”).

Get familiar with the bill and get legal advice on that matter. If you like, you can always get in touch with us. Either to discuss the possibility of cooperation or to get some recommendations of experienced lawyers. Just drop us an email at info@tangany.com.

Sources:

Official draft (German): Entwurf eines Gesetzes zur Umsetzung der Änderungsrichtlinie zur Vierten EU-Geldwäscherichtlinie

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