Deutsche Bank will work with Bitpanda to process customer deposits and withdrawals for the Austrian crypto exchange, the companies told Reuters.

The crypto industry has previously struggled to find banking partners, particularly after the 2023 collapse of Silvergate Capital Corp, Signature Bank and Silicon Valley Bank, which had a high concentration of crypto-related clients.

But in the latest sign of the crypto world moving closer to mainstream finance, Deutsche will provide Bitpanda users in Germany with local bank account numbers.

This means that deposits or withdrawals of fiat currencies from Bitpanda will go through Germany's largest bank. Some banks do not allow customers to transfer funds to crypto exchanges.

Vienna-based Bitpanda, which was founded in 2014, says it has more than 4 million users and offers products including fractional stocks, cryptocurrencies and precious metals.

Regulators have raised concerns about crypto market upheaval spilling into mainstream finance as ties between the two deepen, although analysts say connectivity between remains limited.

Deutsche's global head of cash management Ole Matthiessen said it has taken a "very cautious" approach.

"We only work with very selective partners and clients who demonstrate strong compliance processes, operate in a regulated environment and meet our heightened expectations from a risk perspective," Matthiessen said in emailed comments.

Deutsche does not get involved in the transfer of any crypto through the Bitpanda agreement but instead helps clients transferring in and out of their portfolio while supporting Bitpanda's treasury and payment processes, Matthiessen said.

Kilian Thalhammer, global head of merchant solutions at Deutsche, said it wanted to be "the bank of choice for the high-potential platforms" in the world of virtual asset investing.

A Deutsche spokesperson said that the bank has a similar partnership with Hong Kong-based crypto exchange Hashkey, but that Bitpanda is the first such client in its Europe, Middle East and Africa region.

Bitpanda is already a corporate client of Deutsche's in Austria and Spain but these are not customer-facing, a spokesperson for the exchange said. (Reporting by Elizabeth Howcroft; Editing by Tommy Reggiori Wilkes and Alexander Smith)