Bafin, the Federal Financial Supervisory Authority of Germany issued directions to explain the status of cryptocurrencies and the regulations applied to related business activities. The recent recommendations are in line with the current legislation of the country.
Germany In Favour Of Crypto Sector
The document released by Supervisory Authority focuses on the conditions required for the providers of crypto custody services which operates in the Federal Republic. From the beginning of the year 2020, German banks and prominent regulated financial institutions are permitted to administer digital assets as bitcoin on behalf of their clients. Berlin has recently adopted the amendments switching to Anti Money Laundering Law into National law of Europe.
The German Banking Act defines the crypto custody business as the keeper and manager of crypto assets and the private cryptographic keys and can be called as financial service. The regulators considered that this kind of service could be feasible due to the implementation of the Fourth Anti Money Laundering Directive of the European Union.
The Supervisory Authority clarifies that service providers offering the exchange of digital tokens for fiat currencies and vice versa or other virtual currencies will be considered as financial institutions. The transactions related to cryptos are regarded as regulated banking and financial services transactions, depending on the type of proceedings involved. The broad definition of crypto businesses includes even those digital assets which are not treated as units of account.
Regulatory System To Embrace Cryptocurrencies
The regulators explained that digital assets are not issued or backed by the central bank or any public financial institution and not have the legal status as that of currency of the country. But at the same time, they clarified that virtual currencies can be accepted as a medium of the transaction by natural or legal persons and can be traded electronically also. Tokens also carry the rights as those of traditional securities.
The regulatory system of Germany clarified that any institution who wants to manage and administer banking businesses in the country or maintain financial services commercially, permission is needed from Bafin. Further, firms which are operating in the crypto sector must apply for license till the end of November 2020. The updated regulation has seen the positive outcomes as 40 financial institutions declared their intent to provide services in the crypto industry.