Starting a crypto company in Germany: legal form, BaFin licence and capital

In brief: in Germany you will usually set up a crypto company as a GmbH or a UG. What decides the matter, though, is not the legal form but the business model: anyone who holds, exchanges or arranges crypto-assets for others has needed authorisation from BaFin since MiCA, plus minimum capital of 50,000 to 150,000 euros depending on the service. Anyone offering software, analytics or content generally gets by without a licence. This guide sets out the steps in the right order.

Step 1: establish whether your business model requires authorisation

Before you call a notary, one question belongs settled: are you providing crypto-asset services within the meaning of the EU regulation MiCA? Those include, among others, the custody of crypto-assets for clients, operating a trading platform, exchanging against the euro or other crypto-assets, the execution and reception of orders, and advice and portfolio management.

If that is the case, you need authorisation as a crypto-asset service provider, CASP for short. In Germany it is granted by BaFin on the basis of MiCA and the German Crypto Markets Supervision Act. The transition periods for existing providers have now expired in all EU member states. Whoever is authorised appears in ESMA's public register; what that looks like in practice is shown by the list of authorised providers, and even banks such as the Volksbanken are having their crypto custody approved.

No authorisation is generally needed by anyone who merely supplies software, such as a non-custodial wallet, an analytics tool, development services or a crypto news outlet. The line is fine in the individual case. When in doubt, an enquiry to BaFin or to a specialist law firm pays off before the first client money flows.

Step 2: choose the right legal form

For crypto start-ups, two legal forms almost always come into question, because they limit liability to the company's assets:

Anyone who needs BaFin authorisation starts in practice with a GmbH, because the minimum capital required by the supervisor lies above that of a UG in any case. How the formation runs step by step, from articles of association to the commercial register, is explained in the Gründerfreunde guide to forming a GmbH. For a smaller start there is also a guide there on how to form a UG. Anyone needing a ready-made company quickly can alternatively buy a shelf company.

Step 3: plan capital and the supervisor's requirements

MiCA tiers the minimum capital by type of service:

• 50,000 euros for services such as the reception and transmission of orders, advice, portfolio management or the placing of crypto-assets,
• 125,000 euros where crypto-assets are additionally held for clients or exchanged against money or other crypto-assets,
• 150,000 euros for operating a trading platform.

On top of that come requirements that often cost more than the capital itself: management that is both reliable and professionally qualified, a seat with genuine management in the EU, anti-money-laundering rules, a complaints procedure, IT security under the EU regulation DORA, and the segregated custody of client funds. Allow several months for the authorisation application.

Step 4: issue a token only with a white paper

Many crypto start-ups want a token of their own sooner or later. MiCA applies to that as well: anyone offering crypto-assets to the public has to draw up a white paper and submit it to the supervisor. If the token is a security, securities law applies instead of MiCA. The difference between an ICO and a security token, and what is permitted today, is explained in our guide What is an ICO? What is a security token?

Step 5: bank account, bookkeeping and taxes

Getting a business account is often harder for crypto firms than the formation itself. Banks examine the origin of funds and the business model closely. A clean business plan helps, as does a concept for anti-money-laundering and, where necessary, evidence of BaFin authorisation or of a pending application.

On tax, the position is this: if a GmbH holds crypto-assets, there is no one-year speculation period as there is for private individuals. Gains on a sale are subject to corporation tax and trade tax, together around 30 percent depending on the municipality. Settle the accounting treatment of crypto-assets early with a tax firm that knows the field.

Step 6: use financing and public support

For the first phase the same routes come into question as for any other start-up: equity, business angels, venture capital and public funding. An overview of the funders and what they look for is given in the Gründerfreunde guide to start-up financing. Anyone founding a business while unemployed can apply for a start-up grant. And anyone wanting to test a new business model under supervision should know the options offered by living labs and regulatory sandboxes.

Checklist: setting up a crypto company in Germany

1. Test the business model against the MiCA services; when in doubt, ask BaFin or a specialist lawyer.
2. Choose the legal form: a GmbH where authorisation is required, otherwise a GmbH or a UG.
3. Budget minimum capital and staff for management, anti-money-laundering and IT security.
4. Formation before a notary, entry in the commercial register, business registration.
5. File the authorisation application with BaFin before client business starts.
6. Find a business account and a tax firm with crypto experience.
7. Issue a token only with a MiCA white paper, or as a security with a prospectus.

Frequently asked questions

Do I always need a BaFin licence for a crypto start-up?

No. What requires authorisation are crypto-asset services for clients, such as custody, exchange, a trading platform or the reception of orders. Pure software, analytics tools or media offerings generally need no authorisation.

How much capital do I need for a MiCA licence?

Depending on the service, minimum capital of 50,000, 125,000 or 150,000 euros, plus funds for staff, compliance and IT security.

Is a UG enough for a crypto start-up?

For models outside the authorisation requirement, yes. Anyone who needs BaFin authorisation is better off starting with a GmbH, because the capital required is higher than a UG's in any case.

Note: Gründerfreunde, like cryptoticker, belongs to the group of companies owned by Dennis Weidner. This guide is no substitute for legal or tax advice.