I assume that the focus of the whole story is this amount of $9 billion that this bank is supposedly worth/has, because the story itself is not overly interesting. Anyone who understands Bitcoin at all will surely wonder why they would invest in this way, when they can do it through any CEX and pay a smaller fee + withdraw that BTC to their non-custodial wallet.

The end of the article reveals the real players behind everything, but in every business there are always those who have an idea, and those who only serve as logistics.

The fee is really high, but there will certainly be some customers who are happy to pay this fee because it is easy for them to buy bitcoins without knowing much about it. Either way, it's not so great that you can't cannot move the bitcoins. Certainly, for some customers this is definitely better, since they don't know their way around and could lose them through ignorance, but it doesn't make it any better. So they are nothing more than paper bitcoins, which can be traded but nothing else. That's not the real point behind bitcoin. 

Iirc they already did this thing once with Paypal, and it was not refeived well. How would you market that you're allowing bitcoin trades when users can't take out what they bought from you? I don't think that they even have bitcoins that they're holding to facilitate these trading actions. At best, it may just be APIs and such that gets the price real time and then they take it from there. Entities not allowing bitcoin to be taken out of their custody after "buying" them aren't really selling you bitcoins but shares of worthless air. They can easily do a rug pull any time and you haven't got anything against them because you won't be able to give proof that you have your money with them.

you "own" the account, thus have "request rights" of actions on how to trade the internal balance. however you cant remove the balance as the asset unit. it needs converting back to fiat to escape with fiat.
meaning if they had a loss on the "btc balance" where eg a hack happened. which usually means they throw their business into administration(things like bankruptcy to shuffle value around and eventually fight in court about how much to repay people many many months-years later)

because its in "btc" balance and not fiat, they escape the deposit protection scheme claim procedure. meaning holding 'btc balance' means their customers wont be just getting a cheque in the mail from german government the same month.

EG when you go to traditional bank to invest in tesla. although you deposited fiat into bank the "product" you hold is not fiat. thus the euro deposit protection compensation scheme does not apply to that "balance"

it would be better if able to(quick enough) . to "trade" it back to a fiat balance prior to any legal action. to then possibly be part of the fiat government deposit protection scheme.
however knowing how exchanges work. they are probably going to turn off their internal trading service before publicly disclosing any shenanigans

Let's not get ahead of ourselves here and think that banks are suddenly now bullish on bitcoin. Because if they were, they would be buying it. It's simply the fact that bitcoin has a lot of public interest and the fact that they can monetize through trading fees hence the bitcoin trading integration.

This is great news indeed. It clearly shows that things are changing. N26 is one of the most modern digital banks out there and rhey dont want to miss out on development. This is why they are taking their stand along side cryptos. Hopefully, many will follow!

A bit misleading to say they don't offer custodial wallets, so customers can't move off Bitcoin.

More accurate to say they're not offering exchanging actual Bitcoin. Not a single satoshi sits with them -- I would wager you can't even deposit Bitcoin on that platform.

If I'm wrong, then I'm curious to know how it works here where I live where N26 is a licenced back (with exact same deposit guarantee protections) and if Bitcoin deposits would enjoy the same insurance.