Potential Financial Insecurity for Nuri: "Principally, there's a risk of financial contagion"
German Financial Authorities Strengthen Crypto Oversight Following Nuri's Insolvency
In a significant development, Nuri GmbH, a digital bank based in Berlin, has filed for insolvency due to sudden liquidity shortages. With approximately 500,000 customers and managing assets worth 500 million euros, Nuri's collapse has raised concerns about the stability of the crypto industry.
Nuri did not hold a banking license but worked with Solarisbank, a financial institution supervised by BaFin, for its services. BaFin, the German financial supervisory authority, also oversees solaris Digital Assets GmbH, whose products were brokered by Nuri. However, Solarisbank is not directly affected by Nuri's insolvency.
Crypto custody business is considered a financial service under the Kreditwesengesetz (KWG). Companies providing such services do not require a permit if they act under the liability of a credit or securities institution. This exception regulation, as outlined in § 2 Abs. 10 KWG or § 3 Abs. 2 Wertpapierinstitutsgesetz (WpIG), applies to Nuri and similar contractually bound brokers.
The German Federal Ministry of Finance (BMF) is enhancing the regulatory framework by drafting legislation to implement the DAC 8 Directive. This new legislation, set to take effect from January 1, 2026, will introduce mandatory reporting obligations for crypto-asset services. The aim is to increase transparency for tax authorities and extend reporting requirements to digital payment instruments such as electronic money and digital central bank money.
BaFin is actively monitoring the crypto fintech business models and has enforced licensing requirements strictly, as evidenced by recent actions against unauthorized crypto platforms. The authority is taking into account the current developments at Nuri in its ongoing supervision and checking for possible impacts on supervised institutions.
However, BaFin did not provide an assessment of the infection risk between the crypto industry and regulated banks, nor did it indicate any direct involvement in investigating the case of Nuri's insolvency. The authority continues to monitor the business models of institutions under its supervision, but specific information about monitoring of other German crypto fintechs was not provided.
These measures reflect a comprehensive supervisory approach that integrates international standards to minimize regulatory arbitrage and improve information sharing. By increasing transparency, enforcing licensing rigorously, and aligning with EU directives, German authorities aim to monitor and mitigate risks of financial contagion from the crypto sector to the traditional banking industry, especially after high-profile failures like Nuri that underline vulnerabilities in the crypto-financial nexus.
- The collapse of Nuri, a digital bank managing assets worth 500 million euros, has highlighted the need for increased oversight in the crypto industry, which is a significant part of the broader personal-finance and business sectors.
- In response to Nuri's insolvency, German Financial Authorities are stepping up their regulation of crypto fintech businesses, enforcing licensing requirements more rigorously and implementing new legislation to increase transparency, such as the DAC 8 Directive.
- As the crypto industry continues to intertwine with traditional finance, investing in this sector requires careful consideration, given the ongoing regulatory changes and the close scrutiny of financial authorities like BaFin.
