7 months ago
Germany’s new crypto law came into force on January 1. Just six weeks on, authorities have received more than 40 license applications. Is conservative, cash-loving Germany embracing crypto?
Citing information from government circles, the respected German finance publication Handelsblatt reports that the Federal Financial Supervisory Authority (BaFin) has already received more than 40 applications for a license to provide custody and other crypto services under Germany’s new crypto law. The new anti-money laundering (AML) law allows financial institutions to offer and hold digital assets, alongside classic securities such as shares and bonds. The legislation classifies cryptocurrencies as securities rather than digital money per se, but it permits banks and other financial service providers to offer online banking customers to buy and sell cryptocurrencies practically at the push of a button. Not only crypto-currencies are covered, but also tokens or coins, which are treated as crypto-assets.
German authorities have seen the anonymity of crypto trading as a big problem, as this makes them potentially vulnerable to abuse by criminals or terrorists. Germany’s new crypto law is designed to change this, and could be paving the way to mainstream crypto. “Previous business models, which were too lax in identifying customers, must be adapted or discontinued,” says Berlin. The new regulation also increases consumer protection.
Crypto nation Germany?
In light of the interest in licensing for crypto business, Berlin is optimistic that its market regulation can also be a location factor. “This gives us almost a unique selling proposition that will help us bring serious providers to Germany,” a government statement said. Member of Parliament Frank Schäffler of the traditionally business-friendly FDP party told Handelsblatt, “The market is growing faster than the Federal Ministry of Finance predicted. This is both a blessing and a curse. The high demand for crypto custody licenses shows that companies are increasingly adopting blockchain technology, but it is also a result of the new legislation.”
One of the first institutions to offer crypto services is Berlin-based solarisBank. The bank has founded the subsidiary Solaris Digital Assets. In the event of a successful application for a custody license, the financial institution intends to store Bitcoin and other virtual currencies on behalf of customers. Solaris is a technology company with a banking license, and solarisBank is digital banking-as-a-service platform founded in March 2016.
But as Philipp Sandner of the Frankfurt School Blockchain Center points out, old-school German banks are slow to join in the fray. “The only traditional financial organizations that are interested according to my knowledge are Börse Stuttgart [Stuttgart Stock Exchange] and Main Incubator, a subsidiary of Commerzbank,” he says. He adds that those applying or considering application include Coinbase, Finoa, Plutoneo and Decus Network. As important as the interest of financial institutions is for crypto adoption, Sandner points out that public interest is relatively high – a key driver. According to Statista, approximately 8% of Germans owned some amount of some form of cryptocurrency in 2018, with Bitcoin making up the lion’s share. “German institutional investors are still in the early stages: there are maybe some 100 or 200 legal entities that own crypto assets. Of these, I would guess 10 to 20 are family offices, and 0 large-scale asset managers. But still, adoption is coming.”
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