Caution when accepting customer funds: What crypto-asset service providers need to bear in mind
Published on 18th February 2026
If a crypto-asset service provider (CASP) accepts customer funds in the course of providing crypto-asset services, the question arises as to whether, and to what extent, this is permissible at all. Business models in which customers "top up" and hold balances in order to invest or reinvest in crypto-assets at short notice carry a particular risk of triggering a licensing requirement due to the operation of deposit-taking business. This also applies to crypto-asset service providers that are not licensed in Germany but wish to provide crypto-asset services in Germany on a cross-border basis.
The German Federal Financial Supervisory Authority (“BaFin”) nevth
Existence of a deposit-taking business?
Statutory definition
A banking licence pursuant to Section 32 (1) sentence 1 German Banking Act (Kreditwesengesetz – KWG) is required if the acceptance of customer funds qualifies as a deposit-taking business (banking business) within the meaning of Section 1 (1) sentence 2 no. 1 KWG. The law defines deposit-taking business as the "acceptance of third-party funds as deposits or other unconditionally repayable funds from the public, provided that the repayment claim is not securitised in bearer or order bonds, regardless of whether interest is paid".
Deposit-taking business typically serves to accumulate and hold capital and forms the basis for an institution's lending activities. The purpose of this regulation is to protect the public from losses when investing their funds and to ensure the functioning of the money and credit system.
Cash balance arrangements at CASPs
The term "deposit-taking business" can also cover situations in which customers transfer funds held with a CASP in order to purchase crypto-assets at a later date. From the customer's perspective, such "balance solutions" appear attractive given the volatility of the crypto market: keeping funds in a CASP's segregated or omnibus account enables faster reactions to market movements.
For CASPs, accepting customer funds is not a core business, but an additional service with which they aim to offer their customers enhanced service offering. The possibility of holding balances at short notice allows customers to react more quickly to market opportunities and benefit from favourable price developments. The funds are held in trust for the customer and are not used for the CASP's own purposes. Customers can invest their available balances at any time or have them paid out to specified reference accounts.
BaFin "30-day practice"
In order to offer such client balance solutions, CASPs can, under certain conditions, make use of BaFin's "30-day practice" without requiring a licence to conduct deposit-taking business. This allows customer funds to be accepted at short notice without the licence otherwise required for deposit-taking business. CASPs must comply with certain requirements and document them in a way that is comprehensible to BaFin.
Requirements for the exemption
According to BaFin's administrative practice, the acceptance of customer funds is generally not to be classified as deposit-taking business if certain conditions are cumulatively met.
Earmarking of the funds accepted
The key criterion is the strict earmarking of the funds accepted. The acceptance of customer funds should be exclusively for the purpose of purchasing crypto-assets. If such earmarking has been agreed, the customer generally has no unconditional right to repayment within the meaning of Section 1 (1) sentence 2 no. 1 KWG, which constitutes a defining element of deposit-taking business. The funds are intended exclusively for the acquisition of crypto-assets; any associated custody element is clearly subordinate to the main business relationship and is merely ancillary. The transfer of funds is usually preceded by the customer's intention to purchase, so that it merely serves to simplify and accelerate the payment process for the subsequent purchase of crypto-assets.
The CASP must not derive any economic advantage from holding the funds. In particular, the funds must not be used for its own purposes. It is also not permissible to pay interest on the balance in favour of the customer. This is the main difference to traditional deposit-taking business, which typically serves to refinance the institution.
Short-term acceptance of customer funds ("30-day practice")
The second element is the time limit for accepting funds. The safeguarding of funds should be limited to as short a period as possible from the date of deposit or other inflow, in order to make it clear that these are not funds made available on a permanent basis in the sense of deposit-taking business. In practice, a benchmark of around 30 days is often cited. This also corresponds to BaFin’s approach, which regularly limits the permissible holding period to 30 days as part of its, so far, unwritten administrative practice. However, this period is not a fixed limit, but merely an indicative threshold. Depending on the business model and BaFin's assessment of the individual case, a shorter holding period may also be required. The decisive factor is the overall view of all circumstances, not just formal compliance with a specific deadline. If the planned transaction does not take place within the specified period, immediate repayment to the customer must be ensured.
This requires clearly defined internal processes, in particular reliable deadline monitoring to ensure that the time limit is not exceeded and that customer funds are not held without a concrete intention to purchase. Such organisational precautions can demonstrate that the funds are only accepted on a short-term, transaction-related basis and do not constitute deposit-like arrangements. From a compliance perspective, it is advisable to continuously monitor the compliance rate and to document any deadline violations and the measures taken.
Terms and conditions
The above criteria should also be clearly reflected in the contractual documents. The standard terms and conditions should contain clear clauses informing customers about the purpose and duration of the acceptance of funds.
In particular, it should be stipulated that the funds are held exclusively for the purpose of acquiring crypto-assets, that no interest is paid and that the funds are automatically returned after a certain period of time without investment. It is advisable to include an extraordinary right of termination or automatic repayment if no investment has been made after this period has expired. At the end of this period, the funds must be transferred back to the customer's reference account.
This arrangement takes into account both the criterion of short-term nature and that of earmarking and creates transparency about what happens to the customer funds accepted.
Exceptions to deposit-taking business
In addition to the question of the earmarking and duration of customer funds, certain circumstances may also give rise to statutory carve-outs (scope exemptions) from deposit-taking business, in particular if customer funds are held in separate trust accounts. This is relevant in two respects: Firstly, in its established administrative practice, BaFin recognises the exclusion of deposit-taking business if the repayment claim is “collateralised in a manner standard for banking practice". This also includes collateral that, taking into account the purpose of the rules, can exclude the existence of deposit-taking business. By separating the funds from the CASP's own assets, the customer's repayment claim is protected in a manner providing equivalent protection to standard banking collateral. Customer funds are not held by the CASP itself, but in separate accounts. This creates a functionally similar security element and thus a comparable level of protection for the customer, so that in these constellations deposit-taking business is excluded due to the level of protection achieved.
Secondly, EU law requirements apply, in particular Article 70(2) MiCAR, which lays down specific provisions for the safeguarding of clients' funds in relation to CASPs. According to this, suitable contractual arrangements and internal controls must be put in place to ensure that customer funds are held separately from the CASP’s own assets and are protected from access by the service provider and its creditors. The safeguarding of customer funds in accounts separate from those of the CASP serves to implement these requirements. It is questionable whether compliance with these requirements alone is sufficient to exclude the existence of national deposit-taking business.
Key takeaways and practical guidance
The exception accepted by BaFin for short-term deposits with a specific purpose can be an effective tool for CASPs to offer customer cash balance arrangements to clients without immediately falling within the scope of deposit-taking business. However, it is not a statutory exemption, but rather an expression of established administrative practice. The decisive factor is always the supervisory assessment of each individual case.
CASPs wishing to make use of this practice should consistently align their business model, contractual documentation and internal processes with it. Those who consistently implement these points reduce the risk of unintentionally operating a deposit-taking business, while at the same time creating greater clarity and legal certainty for customers, regulators and their own company.
The regulatory classification of business models in the crypto sector is complex and requires careful examination on a case-by-case basis.
