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BaFin Clarifies Crypto classification in Germany as per EU AMLD5 Directives

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Jayashree Ingle Follow

INDIA

Mar, 10 2020

Mar, 10 2020

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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. 


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Jayashree Ingle

CBW - External Analyst

INDIA

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