The Amended Directive to the Fourth EU Money Laundering Directive will go into force in Germany on January 1, 2020. Some of the key changes affect how the German Banking Act and Payment Supervision Services Act relate to crypto.
Crypto-Assets Are Now Financial Instruments
The new law defines crypto-assets in a somewhat unwieldy manner:
digital representation of a value that is not issued or guaranteed by a Central Bank or a public authority and that does not have the legal status of a currency or money, but that based on agreement or practice is accepted by natural or legal persons as means of payment or exchange or is used for investment purposes and that is transferred, stored and traded electronically.
This is to specifically exempt digitally stored and transferred fiat money, but include both payment and security tokens. Although, the German Federal Financial Supervisory Authority (BaFin) already considers security tokens as financial instruments in other categories.
Custody Defined As New Financial Service
Providers of crypto-custody services in Germany will require a licence from BaFin after January 1, 2020. Companies already active in the area will get a grace period if they notify BaFin of their intent before February 1, and file their application before June 30, 2020.
Interestingly, companies which already provide banking or financial services will not be able to offer crypto-custody services due to heightened IT-security risks. This means that institutions wishing to offer custodial services must do so through a subsidiary.
Also, the concept of ‘passporting’, whereby a registered provider in one EU state does not need separate registration to do business across the rest of the EU, will not apply to crypto-custody. Therefore, a registered Swiss provider (for example) will still need to apply for a German licence to do business there.
As Bitcoinist reported back in August, cryptocurrency payment processor, BitPay, already suspended services in Germany, based purely on the July 2019 announcement of the upcoming changes.
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