Germany was one of the first to take measures to legally regulate the circulation of cryptocurrencies on its territory. The work has not yet been completed, but it is already possible to legally use the crypt for monetary transfer activities.
On January 1, 2020, Germany joined the increasing amount of nations with a special cryptocurrency regulation regime. The country is also one of the main places in Europe where fintech companies thrive. These enterprises are engaged in the production of innovative financial technologies, which are then implemented in the cryptocurrency market.
The German Financial Supervisory Authority (BaFin) has regenerated the region rules for regulating cryptocurrency activities in accordance with the European demands of the AMLD5 Directive. These innovations have affected the existing licensing demands in the German Law of banking by introducing a new class of monetary instruments and also introduced a new licensing demand for custodial services . This article details how the regulation of the cryptocurrency market in Germany has changed.
According to the current German law, cryptocurrency is partially regarded as a financial instrument, but with some restrictions. There is no ban on issuing tokens, mining existing crypto, buying it into ownership and selling it. However, crypto exchange license in Germany is provided. This means that legislators are introducing some prohibitions and restrictions designed to protect the rights of market participants.
Do I need a license to use crypto?
In Germany, regulators do not issue licenses if cryptocurrency is used as a replacement for cash fiat currency or funds in electronic circulation. But only if they are used in money exchange processes. There are no such requirements in laws on state supervision of the financial sector and in documents that establish other requirements for conducting certain types of activities.
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Crypto license in Germany: business climate in the country
In accordance with 5AMLD, regulation of the cryptocurrency sector in Germany has been introduced. In this regard, a “crypto asset service provider” covers the following list of activities:
- Exchange of virtual currencies for fiat/traditional currency (euro, US dollar, pound sterling, etc.) and vice versa.
- Storage of cryptocurrencies on behalf of third parties.
- Transactions activities in virtual currency between clients’ electronic wallets.
- Operations on crypto exchanges.
- Provision of payment services.
- Issue of electronic money.
- ICO (Initial Coin Offering).
- Payment initiation service (PIS).
- Account information service (AIS).
Regulations of cryptocurrencies in Germany
Earlier, the European Banking Authority (EBA) has already published consumer opinions about virtual currencies. However, unlike Bafin license Germany, the EBA opinion of December 13, 2013 does not contain clear legal conclusions. The guidance simply points out the actual legal and tax risks that accompany
- cryptographic values such as bitcoins or ether.
Among other things, the EBA warns of the risk that consumers may lose their money on unreliable marketplaces, for example, when an operator operates without the required official license and/or commits criminal acts (such as money laundering) and then must cease operations. business transaction at any time.
We advise you to pay attention that only companies that provide services to third parties on an ongoing basis are licensed. That is, they provide brokerage services (perform purchase and sale on behalf of clients) and make exchanges in several directions. A license is also issued in the following cases: Financial organizations that change fiat currency to crypto or vice versa; Conduct trading for their money; Perform operations as brokers in accordance with the concluded agreement; Invest for clients on their behalf. The issue of licensing operations for storing tokens and ICO underwriting remains open. In addition, there may be other cryptocurrency transactions that cannot currently be unambiguously classified using fiat currency criteria.
Is crypto regulated in Germany?
Cryptocurrency license in Germany are already in place, although the legislation is far from perfect. However, unlike other countries, coins can be used legitimately and transactions can be made with it within the legal framework. If necessary, you can register and operate a financial company that works with cryptocurrency. Now bitcoin and other cryptocurrencies are already actively used by financial organizations as an additional financial instrument.
Who regulates cryptocurrency in Germany?
In Germany, the determination of crypto assets was introduced in banking legislation, in monetary instruments, the clarity of a new monetary favor regulated by the Banking Law (KWG). As a result of these changes, persons engaged in definite activities and therefore considered financial service providers are subject to registration and licensing under 5AMLD.
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