Like regulators in other countries, German BaFin oversees correct operation of financial system and ensures customers’ security. Therefore, the emergence of a significant number of startups related to crypto-currencies on market, and a lot of media attention, forced regulative bodies to take this area more seriously. In December 2013, the regulation of crypto businesses in Germany was subjected to some modifications and a clearer categorization: BaFin published new rules and fixed the order of supervision over different business models in them.
Cryptocurrency regulations in Germany and the EU
The EBA has previously spoken about its own position on cryptocurrencies. But, unlike BaFin, in the conclusion of the EBA there were no clear positions on the digital currency at the legislative level. The Authority merely provided guidance on the legal and tax risks involved in owning and trading crypto-currencies. EBA talks about risks customers may lose their monetary means in unstable markets, for example, if the operator does not have the appropriate license, or is involved in criminal operations (in particular, money laundering).
Even though any digital assets are referred to as “currency”, this is not their legal definition. Any unit can become a currency or money only if it’s provided by the Central Bank. Cryptocurrencies aren’t issued by a central bank. So, according to the rules of BaFin, such means aren’t money, e-money or a means of payment, or a settlement coin.
The regulator refers to them as means of account under German Banking Provisions, i.e. as price units that are not legal money, which is at least comparable to foreign currencies.
Turnover of cryptographic currencies
Persons paying with cryptographic currencies don’t need to worry about licensing. Additionally, there are no special rules to be observed in the usual use of digital assets as a substitute for means of payment for sales, so businessmen can easily accept such currencies as payment for their own goods.
According to crypto regulation in Germany, obtaining permission from BaFin is necessary for commercial operations with cryptocurrencies, for example, for mining, exchange services, etc. The thresholds for the licensing obligation are constantly changing. If additional service elements are used to apply crypto values, this threshold can easily be exceeded.
For those who are engaged in the extraction, purchase or sale of digital assets to provide themselves with services or goods on the market, for further development and business, you need to be licensed in BaFin. For many interested parties, this has become a particular stumbling block, for example, for a private trading business requiring permission under Section 1(1a) no. 4 of German Banking Provisions if a cryptographic currency is bought or sold.
Licensing of cryptocurrency trading platforms
- If digital assets are traded commercially as any services or goods, they are subject to BaFin regulation.
- Depending on the business model, the organization of the company’s internal operations, as well as the technical implementation, the provisions of the Payments Supervision Act apply.
- Storage of cryptographic currency and private trading are subject to licensing and are possible, as is the conduct of brokerage deals related to investments and the purchase of assets in this category.
The latter option may also be exempted from the need to obtain a license if the entrepreneur works as a contractual intermediary under the responsibility of a credit company.
A businessman who wants to open a company related to crypto assets must settle all the necessary legalization issues at the initial stage. Each interested party can deal directly with BaFin. But in many cases this is not necessary, but, on the contrary, may adversely affect future activities. Our specialists often come across cases where business owners have problems with BaFin, due to lack of experience or ignorance of local laws.
If you want to implement your business model as efficiently as possible, trust our expert, who knows all the nuances in the regulation of cryptocurrencies. Contact us for more information on Germany’s cryptocurrency regulations. We can also offer you many ready-made companies for sale, which will be a profitable turnkey solution for both a beginner and an experienced investor.
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