German financial regulator BaFin classifies cryptocurrency as Financial Instrument on Monday. It also clarified that it would not penalize any unauthorized entity already offering such services. These companies need to show their intention to obtain a license before March 31 and apply for it before November 30.
03 March, 2020 | AtoZ Markets – The German financial regulatory authority has published guidelines classifying cryptography as financial instruments. This decision further expands the definition of financial instruments to include all kinds of digital assets, the previous paradigm covering only security tokens.
BaFin Clarifies Crypto Classification in Germany
In a press release issued on March 2, 2020, the German Financial Regulator (BaFin) classifies cryptocurrency as:
A digital representation of a value has not been published or guaranteed by a central bank or a public body. It is not necessarily linked to a currency specified by law and does not have legal status currency or money. But It accepted as a medium of exchange by natural or legal persons. It can transmit, store and exchange electronically.
The financial regulator also clarified that the definition of cryptocurrency by several entities, including the FATF (Financial Action Task Force), overlaps, which formed the basis of its classification.
The regulator also pointed out that the digital assets are not accounting units. They do not fall into any of its previous categories.
BaFin’s new announcement is also part of the country’s adoption of the AMLD5 which started on January 1, 2020. Part of the AMLD5’s adoption process involves changes to the German banking law and the Payment Supervision Services law.
For cryptocurrency provision, custody means taking over cryptocurrency values as a service for third parties. It includes service providers who store their clients’ cryptocurrency values in a collective inventory without the clients themselves not even know about the cryptocurrency keys used.
Cryptocurrency Custodians Need License
Cryptocurrency custodians will need to obtain a license from the regulatory authority to offer their services in the country. However, cryptocurrency platforms that already operate in the country without a license have until the end of November 2020 to request it. But these platforms must show readiness to do so before March 30, 2020.
According to the report, more than 40 German banks are currently asking BaFin for permission to offer digital asset services.
Besides, cryptos already registered in other EU countries cannot “passport ” their license to operate in Germany. These platforms must request authorization to offer cryptocurrency custody services in the country.
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