BaFin Clarifies Crypto classification in Germany as per EU AMLD5 Directives


As part of its ongoing crypto-related
amendments, aligning with EU’s AMLD5 guidelines, Germany’s financial regulator
BaFin has finally released a clarification on cryptocurrencies. They not only
have acknowledged cryptocurrencies as a financial vehicle but have further
extended the definition of financial instruments which includes crypto-assets in
addition to previously covered security tokens as securities.
Press release by BaFin on Monday 2 March
announced the clear stand of German Federal Financial Supervisory Authority BaFin.
The Press release clearly stated:
“A digital representation of a value that
has not been issued or guaranteed by any central bank or public body is not
necessarily linked to a currency specified by law and that does not have the
legal status of a currency or money, but it is accepted as a medium of exchange
by natural or legal persons and can be transmitted stored and traded
electronically.”
Amendments in legislatures aligning the
guidelines from FATF and EU Directives.
According to BaFin, the new classification
follows the guidelines specified by international watchdog like the Financial
Action Task Force (FATF). The recognition of crypto-assets as financial vehicles
means that currencies can be used as collateral in Germany.
German has been working to implement the EU
directives (AMLD5) from 1 January 2020. This is a significant step in the recognition
of crypto-assets and will help for the mass- adoption process. The alteration
as per AMLD5 directives involves Germany’s Banking Act and Payment Supervision
Services Act.
Cryptocurrency custodians will have to
register themselves with the BaFin as per the new guidelines from BaFin.
Cryptocurrency custodians who already are operating in the country without a license
will have to apply for a license. As per the new alterations in the legislation,
they will have to show at least the willingness to register before March 30, 2020,
and will have to register before the end of November 2020. So far 40 financial Institutions have
declared their intention crypto-related services under the country's updated
laws.
Coins along with security tokens will
now be recognized as Securities
The financial securities definition which
previously added security tokens henceforth will be widened and will include the
cryptocurrencies under the securities without any central authority’s recognition.
The crypto-coins and tokens will have similar rights like that of traditional
securities. This step is considered as momentum towards the mass adoption of
digital assets.
Interestingly, this is the second
international news in the last few days which has recognized crypto assets as
an investment vehicle after the Australian court accepted crypto assets as a
payment mode.

Jayashree Ingle
CBW - External Analyst
INDIA