BaFin-Licensed Crypto Custodian Finoa Will Offer Regulated DeFi

Berlin-based cryptocurrency custody firm Finoa is extending its range of brokerage and crypto staking services to include easy access to a regulatory-compliant form of decentralized finance (DeFi) via the firm’s custodial wallet infrastructure.

Having attained license approvals from German financial regulator BaFin earlier this year, the custody provider is offering its 300-plus institutional clients FinoaConnect, a wallet integration with a curated list of permissioned DeFi platforms, web3 applications and blockchain governance scenarios, the firm said on Tuesday.

Regulated institutions can get involved with DeFi lending pools and automated market making, but they have to know who they are trading with. This has seen a more buttoned up breed of DeFi emerge with added anti-money laundering (AML) measures such as built-in digital identity, or whitelisting of lending counterparties.

In recent months, Finoa has received a good deal of inbound demand to enable decentralized apps in web 3 apps in its custodial wallets, Finoa founder Henrik Gebbing said in an interview with CoinDesk.

Having looked at various off-the-shelf wallet offerings, Gebbing felt these didn’t reflect the security and transaction integrity of Finoa’s custodial wallet infrastructure, built up over the past five years. In the end it made sense to build FinoaConnect on top of the existing proprietary tech, he said.

“An important differentiator is what we as a regulated custodian can and cannot do,” Gebbing said. “What you will not find, for example, is that we just connect Finoa wallets to any kind of decentralized app out there, permissionless DeFi and whatnot. It’s really a filtered, curated set of d'apps that you can work with.”

Finoa did not disclose its curated list of web3 platforms, but examples of institution-friendly DeFi include things like Aave Arc, Compound Treasury and offerings like Maple Finance.