German brokers leading the crypto trading revolution

In the ever-evolving landscape of financial markets, cryptocurrencies have emerged as a prominent asset class, captivating investors worldwide. Germany, known for its robust financial sector, has witnessed a surge in the adoption of cryptocurrency trading. German brokers have been quick to recognise this trend and have seamlessly integrated crypto trading services into their offerings. Today, the decision not to offer crypto trading is considered a service deficit for brokers operating in the German market.

Regulatory Framework

Germany has been at the forefront of establishing a comprehensive regulatory framework for cryptocurrencies. With the implementation of the EU's Fifth Anti-Money Laundering Directive (AMLD5) in 2020, cryptocurrency exchanges and custodian wallet providers became subject to regulatory oversight, ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

In addition, the German government passed the Digital Asset Fund Act and the Electronic Security Act in 2021, providing legal clarity and regulatory certainty for the issuance and sale of digital securities.

These regulations have boosted investor confidence and created a favorable environment for the growth of the crypto market in Germany.

Setup and Concepts for Crypto Trading

German brokers have embraced the demand for cryptocurrency trading by seamlessly integrating these digital assets into their service offerings. However, offering a good and usable crypto product still poses some challenges. 

Almost all services rely on external, specialized partners to provide the relevant services. The bare minimum is often a custodian and a market maker. Additional service providers may be required if licenses or technology are not available to the broker. These include a regulated financial intermediary, a liability umbrella and more. 

In recent years, a number of providers have emerged in this area. Interestingly, in Germany there are usually two to three providers in each segment:

• Financial brokers: Baader Bank, dwp Bank and Sutor Bank

• Market makers: Hyphe and Bankhaus Scheich

• Liability umbrella: Concedes and DonauCapital

• Custodians: Tangany and BitGo

Tangany, as the likely market leader for white label custody, has seen several setups and business cases. On this basis, Tangany can introduce suitable partners to ensure a smooth trading solution for clients. 

A Deeper Look at Custody

As one of the few regulated custodians, Tangany specializes in the needs of brokers for crypto trading setups. These needs include reliable and efficient reconciliation and settlement processes, while ensuring minimal transaction costs on the blockchain. 

This unique experience and service - which goes far beyond custody, such as end-user onboarding and AML handling - often makes Tangany the partner of choice for brokers. 

This table provides an overview of brokers operating in Germany with Tangany as the custodian.

Despite Tangany being the partner of choice for many brokers, there are a few more brokers offering crypto trading with alternative partner setups. Mentionable is Bison by Börse Stuttgart (with Börse Suttgart also being the custodian) and Trade Republic.

The list shows that mostly so-called "neobrokers" are live with crypto trading. More traditional, mostly bank-owned brokers such as 1822direkt, DKB, Comdirect, S Broker or Maxblue are not there yet. This is expected to change in the coming quarters as customer demand for crypto-based investment opportunities increases.

Diverse Offerings

While the integration of cryptocurrency trading is widespread among German brokers, each platform stands out by offering unique features and services tailored to investor preferences.

1. Tradable assets: One factor that differentiates brokers is the range of tradable assets they offer. While some platforms offer focused access to the most popular cryptocurrencies, such as bitcoin, ethereum and solana, others may focus on a broader range, including altcoins, catering to enthusiasts seeking diversified investment options.

2. Staking services: Some brokers go beyond traditional trading by offering staking services, allowing investors to earn rewards by participating in the validation of transactions on blockchain networks. Staking has gained traction as an alternative method of generating passive income within the crypto ecosystem.

3. Deposits and withdrawals: The ease of depositing and withdrawing funds can also be an important decision factor for investors when choosing a trading platform. Deposits and withdrawals can be challenging due to regulatory requirements. With the upcoming EU Travel Rule requirements, new requirements are emerging.

4. Low trading fees: Cost efficiency plays a key role in attracting investors to crypto trading platforms. Many German brokers differentiate themselves by offering competitive trading fees, allowing investors to optimize their returns without being burdened by excessive transaction costs.

Tangany can help cover all of the above and more to build a streamlined and fitting crypto trading product within a generic broker application.

Navigating Regulatory Compliance

With the EU's MiCA regulation due by the end of 2024, new opportunities are opening up. Foreign players value the "Made in Germany" brand, which also applies to regulated financial services. This is why solutions such as Coinbase and BitGo have their EU headquarters in Germany. 

Tangany, as a regulated custodian, will then be able to offer EU-wide custody and staking services. 

The Future of Crypto Trading in Germany

Crypto trading is just the base layer of services for brokers. Based on internal data and insights, it's quite certain that brokers will be looking for new ways to gain an edge over their competitors. Tokenisation is a segment that can provide that edge. Tangany has been custodian of tokenised assets for many years, making it relatively easy to add tokenised and fully regulated assets on the blockchain to a broker's service offering.