Regulators begin with defining what a crypto custody business is – the safekeeping and managing of crypto assets or private cryptographic keys that serve to hold and store crypto assets that can be transferred to others, which is a financial service. The definition stems from the German Banking Act, while providing this type of service was made possible by the law implementing EU’s Fourth Anti-Money Laundering Directive. The changes came into force on Dec. 12, 2019.
Germany now considers service providers who offer the exchange of virtual currencies for legal tender and vice versa, or for other digital assets, to be financial service institutions. Cryptocurrencies, depending on their design, are generally regarded as financial instruments. The exchange of cryptos falls into the category of regulated banking and other financial services transactions. The broad definition has been given in order to account for all crypto assets relevant to the financial market, including digital coins that are not considered units of account.
The guidance further describes cryptocurrencies as a digital representation of value that has not been issued or guaranteed by a central bank or public body and does not have the legal status of a currency or money. At the same time, a crypto can represent an agreement for, or an actual exercise of, a payment or investment. It can be accepted as a medium of exchange by natural or legal persons and be transmitted, stored and traded electronically. Coins and tokens can also bear rights similar to those of traditional securities.
German regulators have made it clear that any organization which wants to conduct banking business in the country or provide financial services commercially needs permission from Bafin. This applies to domestically operated companies, or in other words entities that are based in the Bundesrepublik even if they serve non-residents only, and companies that have established a local office from which they maintain their business activities.
Firms operating in the crypto sector must apply for a Bafin license by the end of November, 2020. So far, over 40 financial institutions have declared intent to offer services related to cryptocurrencies under the country’s updated legislation, as news.Bitcoin.com reported in February. Entities that already work with crypto assets have until March 31 to at least express intent to apply for a license. This is not part of the actual application procedure, but an important step towards acquiring the necessary license.
Do you think Germany’s efforts to regulate the crypto space will create favorable conditions for the development of the industry? Share your opinions on the subject in the comments section below.
Images courtesy of Shutterstock.
Do you want to dig deeper into Bitcoin? Explore past and present cryptocurrency prices through our Bitcoin Markets tool and head to our Blockchain Explorer to view specific transactions, addresses, and blocks.
The post Bitcoin Is Financial Instrument, Clarifies Germany, Crypto Custodians Qualify as Financial Institutions appeared first on Bitcoin News.
TheBitcoinNews.com is here for you 24/7 to keep you informed on everything crypto. Like what we do? Tip us some BATSend Tip now!