Crypto exchange or broker? Custody, costs and regulation compared

Marketing tends to treat these as variations of the same purchase. Legally they have almost nothing in common.

MiCA regulated crypto custody across the EU for the first time. Two provisions are worth knowing by name.

Article 70(1) requires client holdings to be segregated from the provider's own assets and makes clear that crypto-assets held in custody "shall not be available for distribution to creditors of the crypto-asset service provider". That is the central improvement over the pre-MiCA world: your coins are not part of the insolvency estate.

Article 75(8) makes the custodian liable for losses — but caps that liability, since "liability of the crypto-asset service provider shall not exceed the market value of the crypto-asset that was lost". No consequential losses, and an exception for events outside its reasonable control.

And now the part that never appears in an advertisement: there is no deposit guarantee for crypto. The EU's EUR 100,000 protection covers cash deposits at a credit institution. National investor compensation schemes cover MiFID II financial instruments. A crypto-asset that is neither falls under neither. Your protection is proprietary — segregation, separation, liability — not insurance.

Practical consequences:

• Your euro balance and your coins are protected differently. At a platform with a banking licence, or one that holds fiat at a bank, the cash leg may fall inside deposit protection. The crypto leg never does.
• "Proof of reserves" is not an audit. A Merkle-tree attestation shows assets at a point in time. It shows nothing about liabilities, encumbrances or group structure.
• Ask who the sub-custodian is. At brokers the coins almost never sit with the broker itself. The custodian's name, its authorisation and its home jurisdiction belong in your decision.

MiCA Title V has applied to crypto-asset service providers since 30 December 2024. Article 143(3) gave providers already operating under national law a transitional window, which ended no later than 1 July 2026. Since then the position is binary: authorised, or not operating.

You can check this in five minutes:

1. 1Look the provider up in the ESMA register or in the register of the national authority that granted the authorisation.
2. 2Check which legal entity you are actually contracting with. Large platforms run several; the authorised EU entity is not necessarily the one on your signup page.
3. 3Check that the authorisation covers the service you want. Custody, operating a trading platform and exchange services are separate permissions.

Switzerland sits outside MiCA. There, FINMA authorisation, the DLT Act and — for banks — the Banking Act govern instead. The practical difference matters: at a Swiss bank offering crypto, the fiat leg falls under deposit protection and crypto-based assets in custody are segregable under DLT law. A standalone crypto broker without a banking licence offers neither.

Never compare the buy fee alone. What matters is the full circuit: in, hold, out.

Worked example 1 — EUR 5,000 in and out again

A EUR 5,000 purchase and a later sale at the same price:

The gap between the most and least expensive row is EUR 139 on EUR 5,000 — 2.8% of the capital deployed. On a position you hold for years, that is survivable. For someone who rotates twelve times a year it is EUR 1,788 instead of EUR 120.

One point that often gets lost: with some providers the total cost cannot be established at all. Trade Republic, for example, does not publish the spread it applies to crypto, so the full cost of a crypto order cannot be derived from its fee schedule. That is not an accusation — it is a reason to check the price you were actually filled at against a reference exchange at the moment of execution.

Worked example 2 — ETP or coins over three years

Take EUR 5,000, a three-year hold, and a flat price. For the ETP assume a 1.00% annual product fee — find the real figure in the key information document under ongoing costs — plus EUR 1 per order. Some brokers add a spread surcharge on crypto ETPs on top; Scalable Capital, for instance, applies 0.99% on its free tier and 0.69% on the Prime tier.

• ETP: EUR 1 to buy + EUR 1 to sell + 3 × EUR 50 in product fees = EUR 152. Add a 0.99% surcharge on each side and you add EUR 99, for EUR 251.
• Coins on an exchange at 0.25%: EUR 12.50 + EUR 12.50 = EUR 25, plus any network fee if you move to self-custody.

On cost alone the exchange wins comfortably. Before you settle on that: in Germany, tax can reverse the result — though not in the direction most people expect.

Take a EUR 7,000 gain on a EUR 5,000 stake after 18 months.

What to take from that:

Germany. The one-year rule in § 23(1)(2) of the Income Tax Act treats crypto-assets as "other assets" — after twelve months the gain is exempt, at any size. Inside the year, the EUR 1,000 threshold in § 23(3) sentence 5 applies. Careful: that is a threshold, not an allowance. At EUR 1,000.01 of total gains from private disposals the entire amount becomes taxable, not just the excess. Sentence 4 of the same provision extends the period to ten years where an asset is used as a source of income; the tax administration's published position is that this extension does not apply to virtual currencies. That is administrative guidance rather than statutory text — if you stake or lend and intend to rely on the one-year rule, check the current position or take advice. The one-year rule itself has repeatedly been up for political debate; do not assume it will still exist in five years.

Austria. § 27b of the Austrian Income Tax Act treats cryptocurrencies as investment income, taxed at the special rate of 27.5% under § 27a(1), with no holding period at all. One quirk works in your favour: swapping one cryptocurrency for another is not a taxable realisation. Tax is triggered only on disposal for euros, for other assets, or for services.

Switzerland. Capital gains on movable private assets are generally not taxable for a private investor (Art. 16(3) of the Federal Direct Tax Act). In exchange, the holding is subject to cantonal wealth tax, valued at the year-end rate. Two traps: being reclassified as a professional securities dealer reverses the outcome entirely, and staking or lending income is taxable income rather than a capital gain.

For all three: rates and periods change. Check the current position with your tax authority or adviser before building a position whose logic depends on a deadline.

The EU's DAC8 directive has applied since 1 January 2026. Crypto-asset service providers report your identity and your transaction data — acquisitions and disposals against fiat and against other crypto-assets, transfers, amounts and unit counts — to tax authorities, who exchange it among themselves. The definition of a reporting provider is tied directly to MiCA authorisation under Article 63, but also captures unauthorised providers with a sufficient EU nexus.

In practice: the era in which a crypto position was effectively invisible is over. Keep clean records of acquisition dates and holding periods — especially in Germany, where the one-year clock runs per tranche and the burden of proof is yours.

• The exchange is wrong if you hold a small position, will never move to self-custody, and have no appetite for keeping your own records. The fee saving does not justify the overhead.
• The broker is wrong if you actually want to move the coins. Many neobrokers do not permit withdrawal to a personal wallet. What you cannot withdraw is a price quotation, not a crypto position.
• The ETP is wrong if you are a long-term holder in Germany. You are trading a possible exemption after one year for 26.375% withholding tax — and paying an annual product fee on top.
• The ETP is right if you want the exposure inside an existing securities account, tax withheld automatically, and no wallet to manage. Convenience here has a precisely quantifiable price.
• The CFD is almost always wrong for holding: you own no coins, you pay overnight financing, and you hold an unsecured claim on the broker. The ESMA retail leverage cap is 2:1.

1. 1Start with tax, not with fees. Establish how each wrapper is taxed in your country of residence. That difference is usually ten times larger than any fee difference.
2. 2Check your provider's authorisation in the register — and check which legal entity you are contracting with.
3. 3Ask who the custodian is and whether your coins can be withdrawn to your own wallet. If not, you know what you have bought.
4. 4Price the round trip, not the buy fee — including spread, withdrawal and currency conversion.
5. 5Separate fiat from crypto. Do not leave more euro balance on a crypto platform than the next purchase requires.
6. 6Document every acquisition with date, quantity and price. Since DAC8 the platforms report anyway — your records are what let you contest their version.

This article is information, not investment advice.