On March 3rd, German financial watchdog BaFin announced that Bitcoin and other cryptocurrencies are now officially classified as legal financial instruments in Germany. So far, the country’s Federal Financial Supervisory Authority had only accorded security tokens this classification.
This new status is part of a move by the country to update its anti-money laundering laws by implementing the fifth EU Money Laundering Directive (AMLD5), which came into effect on January 1st, 2020. It will require a change in Germany’s payment supervision services and banking acts. It also reiterates the guidelines of intergovernmental agencies like the Financial Action Task Force.
BaFin’s new guidelines define crypto assets as:
“A digital representation of a value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a currency specified by law and that does not have the legal status of a currency or money, but is accepted as a medium of exchange by natural or legal persons and can be transmitted, stored and traded electronically.”
Crypto custodians will now be required to obtain a license from the financial regulator to offer their services in the country. They will not receive penalties as long as they show intent to obtain a license before March 30th, 2020 and apply before the end of November 2020.
As per the guidelines, crypto-custodian firms are defined as:
“The legal facts of the crypto custody business are fulfilled by custodians who take crypto-values into care as a service for third parties. This primarily includes service providers who store their customers’ crypto-values in a collective inventory without the customers themselves being aware of the cryptographic keys used.”
This development in legal finance instruments is likely pave the way for other countries in the EU to follow suit So far, over 40 banks in Germany have filed for the crypto-custodial license; one being the country’s second largest stock exchange which joined the crypto-market as Börse Stuttgart, the second largest stock exchange in Germany and ninth largest in Europe.