Frankfurt-based Commerzbank AG has received approval from German regulators to run a crypto custody business. According to a statement released today, the bank will focus on crypto assets as the demand for the safekeeping of tokenized assets grows.

Commerzbank received a green light to offer crypto custody services after the German regulator approved its expanded license. The agency recently said that so-called full-service banks like Commerzbank must get an expanded license to offer digital asset services.

German Banks Cites Custody Demand

The new license gives European banking regulators insight into how banks are running their digital asset businesses. Another German lender, DZ Bank AG, said it started its digital asset custody platform, but has yet to win a license. Deutsche Bank AG also recently applied for a custody license.

DZ Bank AG and French Bank Société Générale said their crypto licenses are in response to demand. Sygnum Bank in Singapore also recently acquired a license for crypto custody and brokerage services to cope with increasing demand.

Demand for digital asset custody is increasing with the passage of regulations to safeguard the assets of customers of crypto exchanges. An emerging use case is also the custody of tokenized real-world assets, a relatively new industry that represents real-world assets on a blockchain. Swarm, a fully regulated decentralized finance company, keeps tokenized financial instruments with custodians like Gemini or Coinbase before transferring them to a buyer.

Read more: Gemini vs. Coinbase: Which is the better platform in 2023?

Tokenization Needs to Mature

William Quigley, a co-founder of the WAX blockchain, expects businesses that specialize in tokenization to spring up in 2024. The next phase of Web3 is the possession of tokenized assets that can build social connections, he said.

Read more: What is Tokenization on Blockchain?

However, one of the tokenization issues that lawmakers need to resolve is how to transfer ownership of assets across borders. When an asset is transferred internationally, the counterparties may be liable for duties and taxes before the seller can transfer full ownership to the buyer.

SteelWave, a US property company, allows real estate buyers to trade fractionalized shares of tokenized properties. Their business is regulated in Bermuda, where ownership laws have evolved to embrace tokenization. 

The European Union’s (EU) leadership with the Markets in Crypto-Assets (MiCA) bill may make it easier for the tokenization industry to gain traction. While many criticized the bill for not addressing DeFi, its trailblazing bodes well for the future of tokenization in the EU.

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