Self-custodial wallet / non-custodial software in Germany
Publisher of software where users hold their own private keys. The publisher never holds, controls, or has access to user funds.
Self-custodial wallet is conditionally permitted in Germany with a local entity, subject to AML obligations and none licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- None
- Last updated
- 2026-07-13
AML Obligations
- No AML obligations attach to the publisher of non-custodial wallet software because the publisher never holds, controls, or has access to user funds or private keys, and does not perform the regulated activity of 'safekeeping, administration, and safeguarding of crypto assets or private keys' under KWG § 1(1a) Sentence 2 No. 6.
Key Restrictions
- The software publisher must not hold, control, or have access to users' private keys or funds at any point — doing so would trigger a regulated crypto custody license (Kryptoverwahrgeschaeft) under KWG.
- If any value-added services are added (e.g., built-in swapping, fiat on-ramps, staking-as-a-service integrated into the wallet), those activities may independently trigger CASP licensing under MiCA via BaFin.
Key Risks
- Regulatory re-interpretation risk: BaFin could take the view that certain wallet features (e.g., seed-phrase recovery, cloud backup, sponsored transaction gas fees) constitute custody or crypto-asset service, creating retroactive licensing exposure.
- Consumer-protection or software-liability claims may arise under German product liability law or IT security expectations (BAIT/DORA) if the wallet software has defects, even absent a financial regulatory nexus.
- EU MiCA Article 3 definitions of 'crypto-asset service' and 'custody' could evolve through ESMA guidance, potentially capturing non-custodial wallet providers in the future.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Safekeeping, administration, and safeguarding of crypto assets or private keys
German Banking Act (KWG): § 1(1a) Sentence 2 No. 6
German Banking Act (KWG): Since January 2020, crypto custody has been regulated as a financial service requiring a BaFin license.
KWG (Banking Act): Requires BaFin licensing (section 32) for crypto custody business, exchange services, and related financial activities.
Markets in Crypto-Assets Regulation (MiCAR): Applies EU-wide as of the end of 2024, establishing harmonized licensing requirements for crypto-asset service providers throughout the EU.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — pure non-custodial software publishing does not trigger VASP/CASP or AML obligations in Germany because the publisher never holds private keys or funds, but any feature that touches custody, exchange, or transfer services may require a BaFin license under KWG or MiCA.
Questions this verdict aims to answer
- Does software publishing trigger VASP / MSB classification?
- Do AML obligations attach when no custody exists?
- What disclosure or consumer-protection rules apply?