The custody of cryptographic keys and wallets is regulated in Germany according to § 1 Abs. 1a Satz 2 Nr. 6 KWG and the crypto custody business, and in Switzerland by the Financial Market Supervisory Authority (FINMA) and in Austria by the Financial Market Authority (FMA). It requires providers to obtain a license, for which there are high regulatory hurdles and proof of IT security & infrastructure (e.g., HSMs, access management), compliance & risk management, personnel with crypto expertise, compliance with MiCAR and anti-money laundering regulations. These are complex and expensive, which is why very few market participants, such as banks, trustees, notaries, vault custodians, and family offices, currently possess or are pursuing them. AMLD5 and, from 2024/2025, the new MiCAR regulation (Markets in Crypto-Assets Regulation) regulate the crypto custody business across the EU.
The custody of seed lists as part of Seedprotector's Bitcoin backup solution SeedPro is not considered the custody of cryptographic keys or cryptocurrencies within the meaning of the Banking Act and is not subject to any licensing requirements in any country.
The constellations of so-called key splitting (Split Key Custody) are not present with SeedPro. A bank, trustee, or vault custodian who possesses a seed list as a custodian but has no access to wallets is not subject to any licensing requirement, as formally there is no complete crypto custody. The entire word list according to the BIP39 protocol is to be regarded as part of an individual seed phrase and as the complete basic set of all possible words.
Only with SeedPro can service providers carry out professional custody of keys and wallets even without a license.