- Germany has provided legal clarity on the status of Bitcoin and other cryptocurrencies.
- It has published five characteristics of a cryptocurrencies.
- Cryptocurrencies are not to be confused with electronic money.
The Federal Financial Supervisory Authority (BaFin) of Germany has officially defined cryptocurrencies as financial instruments, providing further regulatory clarity. This makes it easier for those spending cryptocurrencies and will give some relief to businesses built around them.
According to the translation of BaFin’s press release published on March 2, cryptocurrencies are now classified as the “digital representations of value” that have the following characteristics:
- Not issued or guaranteed by any central bank or public body;
- Don’t have the legal status of currency or money;
- Can be used by individuals or legal entities as a means of exchange or payment;
- Serve investment purposes;
- Can be transmitted, stored and traded electronically.
The document also notes that cryptocurrencies are not to be confused with various types of “electronic money” which have other sections of the law dedicated to them.
The new classification was based on definitions written by other regulators worldwide, such as the Financial Action Task Force. BaFin also clarified that prior to this, cryptocurrencies did not fall into any of the generally recognized pre-existing categories in Germany.
As Decrypt reported mid-January, new money laundering rules are shaking up the European Union’s cryptocurrency landscape as its 28 member states are now required to comply with AMLD5—the Fifth Anti-Money Laundering Directive which came into force at the beginning of 2020.
According to the new licensing rules set out by financial watchdogs in the UK, the Netherlands and Austria, crypto exchanges and custodians must register with their local regulator and comply with know-your-customer and anti-money laundering procedures to disclose their traders’ identities and report suspicious activity.