Germany Passes Law Enabling Banks to Store Cryptocurrencies
On November 29, 2019, the German Parliament passed a bill which amends an existing anti-money laundering directive to allow German banks to both sell and store cryptocurrencies. The new law will take effect January 1, 2020, though certain requirements must first be met through the country’s financial regulator.
Germany’s New Law Allowing Banks to Store Cryptocurrencies Explained
Earlier today, the German parliament approved legislation which enables banks to both sell and store cryptocurrencies. At the beginning of the month, the bill was approved by the parliament’s lower house — the Bundestag — and has now seen approval by the upper house, the Bundesrat.
The new law will take effect January 1st, 2020. For both banks and existing cryptocurrency custody providers, certain measures will need to be satisfied — including the acquisition of a license from Germany’s financial regulator BaFin — by the end of the year. This includes popular exchanges such as Binance and Kraken, if they wish to continue doing business in Germany.
In order to obtain the necessary approval and licensing, companies will have to fulfill specific requirements. They must have a legal German entity — comprised of at least two directors who operate in Germany — by the start of 2020.
BaFin also needs to be aware of the intent to provide cryptocurrency custody services by the end of March 2020, with a complete application submitted by the end of November 2020. To take things a step further, any cryptocurrency custodians who are not an established German legal entity by January 2nd 2020 will be deemed illegal.
Currently, German banks are prohibited from possessing cryptocurrencies. This stems from a European Union Anti-Money Laundering Directive. Now however, the directive will be amended, allowing banks to not only store cryptocurrencies but to legally sell them to both retail and institutional investors.
According to Sven Hildebrandt, partner at DLC, a German crypto consulting firm,
“Germany leads the way in crypto regulation, for sure. This leads to institutional investors coming to Germany, as they want security and regulation. Germany is well on its way to becoming a crypto-heaven.”
Hildebrandt also added,
“If you can hold [cryptocurrencies] in your bank account, that is massive for adoption. I believe that this will act as a role model for all the other laws that will be coming into force Europe wide. Germany is driving crypto adoption forward and wants to play a leading role in Europe as well. One of the key challenges is keeping private keys safe.”
Germany and Security Tokens Explained
Germany and BaFin have also shown strong support for security tokens as well. This new form of raising capital leverages the benefits of blockchain technology — as seen in the popular Initial Coin Offering (ICO) — while declaring itself a securities offering. As such an offering, it is therefore subject to the stringent laws and regulations that come with fundraising.
Numerous security token offerings (STOs) have been approved by BaFin, from the likes of StartMark, Neufund, and BitBond. Despite the legality of STOs, many financial regulators across the globe remain hesitant to support the new offering type due to the ICO’s clouded nature in terms of legalities.
Yet this is not the case in Germany. The jurisdiction has made headlines in the security token space, and now continues to make headlines in the larger cryptocurrency space. The country is indeed taking a proactive approach in what seems to become an attempt to create a hub for blockchain-powered innovation.
Though right next door, the French government is doing something similar. Perhaps in western Europe, the race is on.
What do you think about Germany passing a bill to allow banks to sell and store cryptocurrencies? We want to know what you think in the comments section below.
Image courtesy of Germany Travel.