Crypto Companies Warn German Lawmakers over Regulatory Uncertainty

German venture capital firms Neufund and Freigeist VC have called on the country’s lawmakers to take immediate action to protect blockchain and cryptocurrency investments after a recent court ruling said that virtual trading is outside of existing laws. Regulatory uncertainty can badly damage Germany’s opportunities to take a leading role in the digital revolution, Zoe Adamovicz, the CEO of Neufund, and Frank Thelen, startup founder and tech investor at Freigeist VC, wrote in an open letter to Bundestag on Wednesday.

In September, the Berlin Regional Court decided that Bitcoin (BTC) and other cryptocurrencies do not meet the financial instrument definition in the current German legal framework and thus reversed a ruling by the country’s financial regulator that had put cryptos in this category. The court decision came as part of a legal battle between Federal Financial Supervisory Authority (BaFin) and a digital currency trading platform accused by BaFin of working without registration.

According to Adamovicz and Thelen, the court ruling that the crypto industry is outside of institutional regulation, control and protection, will make investors very cautious and uncertain whether or not to back blockchain and virtual asset projects.

“This call to action is inspired by the ruling […] of the Berlin Higher Regional Court from 25.09.2018 where it was held that Bitcoin is not a financial instrument,” Adamovicz and Thelen wrote. “If institutional watchdogs such as the German Financial Supervisory Authority (BaFin) do not have clear guidance from political bodies in place, they will not be able to execute their responsibilities. And if watchdogs do not know how to act, how can we expect that from entrepreneurs and investors?”

Both VC managers urged Bundestag members to issue immediate guidance to BaFin as changing a law or writing a new framework will take a longer time. Adamovicz and Thelen also called on Bundestag members that are pro-DLT to openly express their positions and to follow examples of Germany’s neighbor France.

“Regulatory certainty needs to be assured now, otherwise we endanger the thriving Blockchain ecosystem in Germany. It is unacceptable that young entrepreneurs face criminal charges because [the] watchdog institution has no clear regulation at hand. We can’t allow that valuable Blockchain companies keep on becoming collateral damage of bad actors in the scene,” the letter noted.