On Monday, Bafin published regulatory guidelines to classify digital assets, including virtual currencies, as financial instruments.
According to the financial regulator, virtual currency is “a digital representation of value, which is not issued or guaranteed by any central bank or public institution, is not necessarily linked to the currency stipulated by law, and does not have the legal status of a currency or money. However, it is regarded as a medium of exchange by natural or legal persons and can be transmitted, stored and traded by electronic means. “
The regulator also clarified that multiple entities, including FATF, had overlapping definitions of cryptocurrency, which formed the basis for its classification.
The guide also points out that cryptocurrency is widely defined because digital assets that were not accounting units before did not belong to any previous asset classification.
Clarify cryptocurrency regulations
Before that, Bafin updated its existing anti money laundering (AML) laws, requiring companies that provide cryptocurrency custody to obtain operating licenses. It also stated that it would not impose penalties on any unlicensed entity that has already provided such services. The companies just need to show that they intend to get such a license by March 31 and apply for one by November 30.
According to local reports, more than 40 German banks are now seeking Bafin’s approval to provide digital asset custody services in the country.
“According to the wording of the regulation, it is not necessary for the relevant enterprises to store, manage and protect encryption assets or private encryption keys at the same time for holding, storing or transmitting them,” Bafin said. (translated from German)
“The purpose of this provision is that escrow means taking care of encrypted assets as a service of a third party. This mainly includes service providers, who store customers’ encryption assets in a collective list, and customers themselves do not know the encryption keys used by these assets. “
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