The partnership means Deutsche Bank will, for the first time, be able to hold a limited number of cryptocurrencies for its clients, as well as tokenised versions of traditional financial assets, a Deutsche Bank spokesperson said.

Crypto trading is not in the bank's "immediate plans", the spokesperson said. Deutsche Bank said it aimed to offer crypto trading in a World Economic Forum paper back in 2020.

Crypto markets have struggled to recover from last year's series of collapses at top crypto firms, which left investors with large losses and prompted lawmakers around the world to call for more regulation. Still, various mainstream financial firms are talking about the possibility of blockchain - the technology behind cryptocurrencies - to be used in the trading and settlement of traditional financial assets.

Various banks, including Standard Chartered, BNY Mellon and Societe Generale, offer crypto custody services.

"As the digital asset space is expected to encompass trillions of dollars of assets, it's bound to be seen as one of the priorities for investors and corporations alike," said Paul Maley, Deutsche Bank's global head of securities services.

The crypto market is worth around $1.1 trillion, down from a peak just above $3 trillion in November 2021, according to CoinGecko data.

"Our focus is not just on cryptocurrencies, but supporting our clients in the overall digital assets ecosystem," Maley added.

U.S. regulators have warned banks to be on guard for liquidity risks from crypto-related clients.

Maley said Deutsche Bank is proceeding "cautiously and in line with the spirit and the letter of the regulations governing this asset class."

"Our product design, and the nature of custody for clients, will make sure that there isn’t the risk of contaminating the bank’s other activities," he said.

Reporting by Elizabeth Howcroft; Editing by Christina Fincher
(REUTERS)