On January 1st of 2020, the enforcement of the Amended Directive to the Fourth EU Money Laundering Directive will begin. Some of the main changes will affect how the German Banking Act and Payment Supervision Services Act relate to crypto. Let’s find out more about the upcoming cryptocurrency news below.
The new law defines cryptocurrencies in a fairly clumsy way:
“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.”
The defining is like this In order to concretely exempt digitally stored and transferred fiat currency but also includes payment and security tokens. Though, the German Federal Financial Supervisory Authority (BaFin) has already counted security tokens in the list of financial instruments in other categories.
Providers of custody services for cryptocurrencies in Germany will be requested to require a certain license from the German Federal Financial Supervisory Authority (BaFin) from January 1st of 2020 according to the German Banking Act. Companies already present and active in this sector will be granted a grace period if they fulfill these conditions, notifying the German Federal Financial Supervisory Authority (BaFin) for their intent before the 1st of February and file their application before 30th June of 2020.
Remarkably, companies that provide banking or financial services will not be allowed to give custody services for cryptocurrencies because of the heightened cybersecurity risks. This puts the aforementioned companies in a specific position, meaning that if they want to give custody services for cryptocurrencies, they must do that through subsidiaries. In addition, the concept of ‘passporting’ where a registered provider in one EU member state doesn’t need to register again to do business across the other EU member states, will not be applicable to custody services for cryptocurrencies. Consequently, a registered Bulgarian provider will be requested to apply for a German license to do business in the country.
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