Germany officially recognizes Bitcoin as Financial Instruments

German financial regulator (BaFin) issued a new summary leaflet detailing how to deal with accordance to the law enacted in 2020 a new encryption currency. These instructions are BaFin’s interpretation of Germany’s new legislature.

The March 2nd document “sets new regulatory standards” and if companies wish to provide cryptocurrency custody services, they must adhere to these new standards. This is a generic term that includes all businesses that hold cryptocurrencies for customers, including exchanges, financial services or banks.

Jan 1, 2020 launch of the new encryption currency regulations is the German part of a broader legal initiatives remain consistent with the fifth EU Money Laundering Directive (5AMLD). According to the German “Banking Law”, handling encryption currency is now regarded as a financial services provider must be authorized by the BaFin.

Paper highlights

Instructions that clarify aspects of Bitcoin regulation that were previously undefined. Due to the previous definition of encryption currency regarded as subjects units, so deal with encryption currency business it is not considered a financial service provider.

As a result, BaFin created a broader definition of crypto assets, which also illustrates the difference between tokens used for payment and exchange and security tokens.

The document states that securities tokens are not considered securities under the German Securities Deposits Act. However, if they are transferable and tradable, they are regulated by the EU regulations on this issue.

Regulators also clarified who can store cryptocurrencies provides a very general definition that can be applied to most businesses. The document explains who can get BaFin authorization:

“Anyone who wants to do banking or provide professional services in Germany or who needs to do business in a commercial way.”

However, the storage of tokens is still a subtle issue, because under certain circumstances, businesses that are not licensed to store general securities may be able to use security tokens for storage.

Active cryptocurrency custodians granted transition period

The companies concerned must submit an application request from the regulatory authority for the future BaFin license before March 31, 2020, or submit a complete application by November 30, 2020. Legislators are also granting a transition period until November 30, 2020, for crypto custodians that are already active in Germany. Afterwards you have to show a BaFin license.

The government cabinet passed a first bill for the new regulations in August. Subsequently, the Federal Council had clarified the new legal term crypto values. In September the federal government adopted its  blockchain strategy and part of it are the new regulations

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