In the dynamic world of digital assets, security and regulatory compliance are paramount. For investors and institutions, the concept of "Bankruptcy Remoteness" when assessing counterparty risk is crucial, especially when dealing with crypto assets. As a leading qualified crypto custodian in Germany, Finoa is at the forefront of providing unparalleled asset protection and security. This post delves into how Finoa ensures customer assets are handled with the utmost care and protected against bankruptcy risks, aligning with Germany's unique and rigorous legal framework in force from 2020.

The Significance of Qualified Custodianship

Finoa, as a qualified crypto custodian, adheres to stringent regulatory standards, ensuring client assets are managed with the highest security and compliance measures. Qualified custodians like Finoa are regulated financial entities authorized to hold and safeguard crypto assets on behalf of clients. This status involves regular full-scope operational and organizational audits conducted by independent third-party audit firms, essential for validating the compliance with regulatory requirements by BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) and Bundesbank. 

Germany’s Unique Legal Framework for Crypto Custody

In Germany, the legal framework for crypto assets and crypto custody is exceptionally robust, providing an advantageous environment for investors since January 2020.

In Germany, crypto assets are embedded in the German Banking Act (KWG) and the Federal Financial Supervisory Authority (BaFin) is tasked in supervising and regulating financial institutions, including crypto asset service providers like Finoa.

To safeguard customer funds, Finoa employs stringent segregation practices by assigning distinct wallet addresses for each asset across all accounts, a process transparent and verifiable on-chain ("on-chain segregation"). This method not only guarantees technical segregation and balance sheet separation but also ensures that client assets are treated as special assets, distinct from those of other customers and Finoa's own assets, thereby securing them in the rare event of bankruptcy.

Should such an event occur, Finoa's clients would possess the unequivocal right to segregate their crypto assets from Finoa’s insolvency estate, further reinforcing the robust protection mechanisms in place. This concept, known as “Bankruptcy Remoteness”, is now uniquely clarified by §46i of the German Banking Act (KWG), a landmark framework among the G20 member states, which governs the allocation of custodial crypto assets and the costs of segregation in insolvency scenarios.

Furthermore, the equity requirements mandated by the regulator add an additional layer of value, enhancing Finoa's financial resilience and offering clients even greater security and confidence in the custody solutions provided.

BaFin’s Special Audit Focus 2023

In 2023 the German regulator BaFin issued an audit directive, asking the externally appointed audit firms of regulated crypto providers to conduct a specific IT audit focussed on the "review of the segregation of client-owned crypto assets and client funds." This audit was a critical aspect of investor protection. Finoa's compliance with these rigorous standards is a testament to its commitment to client asset security. The audit concluded that the measures and precautions taken by Finoa are appropriate and effective, reinforcing the confidence in Finoa’s operational integrity.


In an industry where security and compliance are non-negotiable, German legal frameworks and regulations stand out as a beacon of trust and reliability. The stringent German legal framework, coupled with Finoa's adherence to BaFin’s regulations, provides a secure haven for crypto assets. Investors and institutions looking for a qualified crypto custodian can trust Finoa to offer not only top-tier asset protection but also peace of mind in the dynamic and often uncertain world of digital assets.

For more information about Finoa’s services and how we ensure the security of your digital assets, visit our website or contact us at