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Choose the legal entity that will actually hold or control your crypto-assets, then verify that entity in BaFin’s company database and the ESMA MiCAR register. Confirm that its authorisation explicitly covers custody and administration for the assets and services you need. Only after that should you compare the written custody agreement, key-management controls, client-asset segregation, insolvency treatment, reporting, fees, supported assets, complaints handling and recovery procedures.

A familiar exchange name, mobile app or German-language website is not evidence of authorisation. Regulation is a baseline for governance and conduct; it does not stop Bitcoin or other crypto-assets falling in price, guarantee that every loss will be recovered, or eliminate blockchain and operational risks.

What “regulated” means for a German crypto custodian

In Germany, crypto custody is a regulated financial service, but the applicable permission depends on the legal entity, the service and the asset. Germany previously required authorisation for Kryptoverwahrgeschäft under the German Banking Act (KWG). The Markets in Crypto-Assets Regulation (MiCAR) introduced a harmonised framework for crypto-asset service providers. MiCAR Title V requirements for providers, including custody and administration, have applied since 30 December 2024. Certain issuer and investor-protection provisions began applying on 30 June 2024.

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BaFin says approvals are published in three places: the Bundesanzeiger, BaFin’s company database and ESMA’s interim MiCAR register. Treat those records as the starting point for due diligence. A group may operate several companies, some authorised and some not. The company named in your contract—not the brand on the app—is the provider whose permission and insolvency position matter.

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Authorisation is service-specific

A provider can be authorised for one activity and not another. Look for wording equivalent to “custody and administration of crypto-assets on behalf of clients.” A licence to operate a trading venue, execute orders, place tokens, provide advice or transfer crypto-assets does not automatically authorise custody. Record the legal name, registration number, regulator, country of authorisation, authorisation date and every relevant service shown in the register.

MiCAR does not cover every token

MiCAR covers electronic-money tokens, asset-referenced tokens and other crypto-assets within its scope. A token that qualifies as a financial instrument can fall under securities rules instead. Some unique non-fungible assets and other instruments can sit outside MiCAR. Ask the custodian to identify the legal classification of each asset you intend to deposit and explain which permission covers its custody.

Step 1: Identify the contracting entity before comparing products

Start with the custody agreement, terms of business and legal notice. Write down the exact company that will owe you the custody obligations. Do not substitute a parent company, local marketing subsidiary, liquidity partner or technology vendor. If a German customer is onboarded by an entity in another European Economic Area country, note that entity’s home regulator and whether it is using MiCAR passporting to serve Germany.

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Questions to answer from the documents

  • What is the full legal name, registered office and company number?
  • Which regulator authorised it, and under which framework?
  • Does the register list custody and administration, or only another crypto-asset service?
  • Which countries and customer types may use the service?
  • Is another company the wallet operator, key holder, settlement agent or subcontracted custodian?
  • Which entity handles complaints, statements, withdrawals and the return of assets?

Save a PDF or screenshot of each register result and note the date checked. Registers and permissions can change; a record lets you prove what you relied on when you opened the account.

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Step 2: Verify BaFin and ESMA records

  1. Search the exact contracting entity in BaFin’s company database. Check the spelling, legal form and registered address against the agreement.
  2. Check the ESMA MiCAR interim register for the same entity. Confirm the authorisation status, home authority and listed services.
  3. Look in the Bundesanzeiger publication identified by BaFin when you need the formal authorisation notice or a historical date.
  4. Compare the register entry with the provider’s website, app and customer contract. Treat any mismatch as a stop signal until the provider explains it in writing.
  5. Record the result date, authorised services, asset limitations, passporting information and any transitional status.

A search result that only shows a similarly named company is not confirmation. Ask the provider for its legal entity identifier and regulator reference, then search those details independently rather than following a supplied link.

Step 3: Read the custody agreement before sending funds

MiCA Article 75 requires a custody provider to conclude an agreement specifying its duties and responsibilities. The European Securities and Markets Authority’s wording is direct: “Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall conclude an agreement with their clients to specify their duties and their responsibilities.”

The agreement should clearly describe:

  • the parties and the crypto-assets covered;
  • the custody service, including whether the provider controls private keys, access credentials or both;
  • the custody policy and wallet structure;
  • authentication methods and communications channels;
  • security systems, incident notification and business-continuity arrangements;
  • all charges and how they can change;
  • the governing law, courts and complaint route; and
  • how assets, credentials and records are returned when the relationship ends.

Read schedules, risk disclosures and product-specific terms as part of the agreement. A headline statement such as “assets are secure” cannot replace a description of who can sign transactions, what happens during a service outage or how a deceased customer’s estate obtains access.

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Step 4: Examine the custody architecture and security controls

Security is a process, not a label. Ask for a plain-language explanation of the technical design and the controls that surround it. You do not need the provider to reveal exploitable details, but you do need enough information to understand where authority and failure points sit.

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Key-management model

  • Online or hot storage: keys are connected to systems used for frequent transactions. It can support fast withdrawals but exposes signing infrastructure to more online threats.
  • Offline or cold storage: signing material is kept disconnected except during controlled procedures. Withdrawals can take longer and require scheduled access.
  • Multi-signature or multi-party computation: more than one independent approval or cryptographic share is needed. Ask how shares are distributed, who can act alone and what happens if a participant is unavailable.
  • Omnibus wallets: several clients’ assets share an on-chain address while an internal ledger attributes balances. Ask how the ledger is reconciled to the chain and how an insolvency administrator can identify your entitlement.

Withdrawal and account-change controls

Confirm whether withdrawals require separate approvals, allow-listing, transaction limits, cooling-off periods or out-of-band confirmation. Ask how a new withdrawal address, phone number or administrator is authenticated. A strong design uses independent channels and records every approval, rather than relying solely on a password or a single employee.

Monitoring, incidents and subcontractors

Ask how the provider detects abnormal transactions, key compromise and blockchain reorganisations; who is notified; and what services are paused during an incident. If a subcontracted wallet or security provider is involved, identify it and verify that the subcontractor is authorised where required. Article 75 requires a custody policy that minimises loss risks from fraud, cyber threats and negligence and requires authorised subcontracted custody providers when subcontracting is used.

Request the provider’s latest independent assurance or audit summary, security certifications, penetration-test scope and material incident history. These documents are evidence of controls, not a promise that losses are impossible.

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Step 5: Confirm segregation and insolvency treatment

MiCA requires client holdings and the means of access to be segregated from the provider’s own holdings, both legally from the provider’s estate and operationally in day-to-day systems. Ask the provider to explain that separation for every wallet type it uses.

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What to clarify in an omnibus arrangement

  • How your balance is recorded in the client position register.
  • How on-chain assets are reconciled with the internal ledger and how often.
  • Whether client assets are ever mixed with treasury, collateral, lending or staking inventories.
  • How the provider identifies each client’s share if a wallet contains assets for many customers.
  • Which records an insolvency administrator receives and how customers submit a claim.

Segregation is not the same as deposit insurance. It is intended to keep identifiable client assets and access means outside the provider’s estate, but legal proceedings, fraud, incomplete records or a shortfall can delay recovery. Ask for the documented return process, the responsible contact and the expected sequence if the provider stops operating.

Liability has a defined limit

For attributable loss, the provider’s liability is capped at the market value of the crypto-assets when the loss occurred. That wording matters during a volatile market: it does not promise the value your holdings would have reached later, and it does not cover a fall caused by normal price movement.

Step 6: Check statements, records and recovery procedures

The custodian must maintain a client position register and provide an electronic statement at least every three months and whenever you request one. The statement must show the crypto-assets, balance, value and transfers during the period.

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Test the reporting before funding

  1. Download a sample statement or open the reporting screen in a demo or unfunded account.
  2. Check that each asset is identified unambiguously, including network where a token exists on more than one chain.
  3. Confirm that deposits, withdrawals, fees, conversions and internal transfers appear with timestamps and transaction identifiers.
  4. Ask how historical statements are retained and exported if the account is closed.
  5. Make a small test deposit and withdrawal, then reconcile the statement with the blockchain explorer and your own records.

Plan for closure, death and a security event

Get written timelines and required documents for voluntary closure, an account holder’s death, loss of authentication, a frozen account and a provider-wide incident. Ask whether assets are returned to a self-custody address, transferred to another regulated custodian or held pending a court or estate decision. Confirm who can approve the request and whether recovery fees apply.

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Step 7: Compare the complete fee schedule and conflicts

Compare the contractual cost of holding and moving assets, not just a trading commission. Ask whether a fee is fixed, percentage-based, network-dependent, one-time or recurring, and whether the provider can change it without your individual consent.

Cost or activity What to verify
Custody Recurring charge, minimum balance, billing frequency and whether it varies by asset or wallet type.
Deposit and withdrawal Provider fee, blockchain network fee, minimum amount, processing time and address-screening charges.
Trading or conversion Spread, commission, execution venue, price source and whether custody continues during settlement.
Inactivity or closure When it starts, how notice is given and whether it can consume a small balance.
Recovery and special handling Charges for lost authentication, estate requests, chain incidents, mistaken network deposits or manual reviews.

Ask whether the provider lends, rehypothecates, stakes or otherwise uses client assets. Record whether separate consent is required, who bears the resulting risk, how rewards and losses are allocated, and whether those activities affect segregation or the ability to withdraw immediately. A high advertised yield can indicate a different legal and risk arrangement from plain custody.

Step 8: Match the licence to your assets and use case

Create an asset-by-asset list before choosing a provider. Include the token name, network, whether you need trading or only storage, expected transaction frequency and any staking or governance requirement. Have the custodian confirm in writing that it supports the exact asset and network under its authorised service.

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Your requirement Evidence to obtain
Long-term Bitcoin or ether holding Custody authorisation, wallet model, withdrawal controls, segregation language and recovery procedure.
Stablecoins MiCAR classification, supported issuer and network, redemption or suspension disclosures, and transfer limits.
Security-token exposure Confirmation of whether the instrument is a financial instrument governed by securities rules rather than MiCAR custody.
Non-fungible or unique assets Written legal classification and a description of how ownership and metadata are preserved.
Staking or lending Separate terms, consent mechanics, counterparty exposure, lock-up period and treatment in insolvency.

Step 9: Treat regulation as a baseline, not a price guarantee

A 2025 factsheet from the European Banking Authority, European Insurance and Occupational Pensions Authority and ESMA says authorised providers must meet requirements concerning governance, capital, conduct and consumer protection. The same warning says unauthorised providers may leave customers with limited or no consumer-protection rights.

Authorisation does not insure the market value of your coins. It does not prevent a token price collapse, a blockchain becoming unavailable, a protocol exploit outside the custodian’s control or every operational error. It does give you a defined regulatory perimeter, contractual duties, complaint channels and segregation requirements that an unauthorised provider may not have.

Build a documented shortlist

Use one worksheet for every candidate so that a polished interface cannot hide a material difference. The following fields cover the decisions that affect safety and access:

Comparison axis Record for each candidate
Legal identity Contracting entity, company number, registered office, regulator, register date and passporting status.
Authorised service Exact custody wording, other permissions and any asset or customer restrictions.
Assets and networks Supported coins, token classifications, networks, deposit limits and withdrawal availability.
Key management Hot/cold allocation, multi-signature or MPC design, approval quorum, location of backups and recovery authority.
Wallet structure Segregated or omnibus addresses, ledger reconciliation, proof or audit information and subcontractors.
Operational resilience Incident detection, notification times, business continuity, maintenance windows and recovery-time commitments.
Client records Statement frequency, on-demand access, transaction history, exports and retention after closure.
Fees Custody, trading, withdrawal, network, conversion, inactivity and recovery charges, including change clauses.
Conflicts Lending, staking, rehypothecation, proprietary trading, related parties and consent requirements.
Support and complaints Support channels, German-language availability if needed, escalation route, response targets and external redress.

Red flags that should stop the onboarding

  • The app names a brand but the contract names a different, unverified company.
  • The provider displays a “regulated” badge without naming the regulator, licence number and authorised service.
  • The register lists trading or exchange services but not custody and administration.
  • Terms permit lending, staking or reuse of assets without separate, intelligible consent.
  • The provider will not explain omnibus-wallet reconciliation or what an insolvency administrator receives.
  • Statements omit balances, values, transfers or network information, or cannot be exported.
  • Withdrawals can be redirected by one password reset or one employee approval.
  • Fees are shown only at checkout, change without notice or exclude network and recovery charges.
  • Support pressures you to deposit before you receive the custody agreement.
  • The company asks you to send assets to a personal wallet, unrelated affiliate or address not documented in the contract.

A practical pre-funding checklist

  1. Obtain the final custody agreement and all incorporated policies.
  2. Verify the contracting entity in BaFin’s company database, the ESMA MiCAR register and the relevant Bundesanzeiger publication.
  3. Save dated evidence of the register entries and confirm the exact custody service.
  4. Map each asset and network you plan to use to the provider’s written support and legal classification.
  5. Document wallet, key-management, approval, subcontracting and incident procedures.
  6. Confirm legal and operational segregation, omnibus treatment and the insolvency return process.
  7. Download a statement, test a small deposit and make a small withdrawal to an address you control.
  8. Reconcile the provider statement, fee deduction and blockchain transaction.
  9. Store emergency contacts, authentication recovery instructions and estate documents offline.
  10. Review the arrangement whenever the provider changes its legal entity, terms, wallet architecture, supported assets or fee schedule.

The decision is defensible when you can show which authorised entity holds your assets, what it is permitted to do, how your holdings are recorded and segregated, what you will pay, and how you or your estate will regain control if the service fails. If any of those answers depends on a marketing claim rather than a register entry or contract clause, keep looking.

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