News on the Regulation of Crypto-Financial Services
German legislator subjects cryptosafe custody business to the BaFin supervision.
As part of the implementation of the 5th Money Laundering Directive (Directive (EU) 2018/843), the German legislator plans to classify the so-called “cryptosafekeeping business” as a financial service in accordance with the German Banking Act.
Crypto-custody and crypto values – what are these?
A crypto-custody business is defined in the draft bill as the safekeeping, administration and security of cryptographic values or private cryptographic keys used to hold, store or transmit cryptographic values for others. Crypto values are financial instruments and include non-governmental, digital representations of a value that is accepted in business transactions as a means of exchange and payment or serves investment purposes. The prerequisite is that the value can be transmitted, stored and traded electronically. In addition to tokens with exchange and payment functions (e.g. Bitcoin), this definition also applies to tokens that serve the investment (so-called security tokens and investment tokens).
What will change?
In the near future, companies wishing to offer crypto-custody services in Germany will have to apply for a licence and will be subject to the supervision by the German Financial Supervisory Authority BaFin. In addition to the anti-money laundering regulations, these companies would also have to meet other regulatory requirements, such as a certain minimum share capital or requirements for the reliability of the managing directors.
Will Austria follow suit?
In Switzerland, the supervisory authority FINMA also granted two block-chain financial service providers a Banking licence and a Securities Dealer licence each. The development in crypto-financial services is therefore clearly moving in the direction of greater regulation. It remains to be seen whether the Austrian legislator, which has already implemented the 5th Money Laundering Directive under EU-FinAnpG 2019, but for the time being only provides for a registration obligation for providers of crypto wallets and exchange as well as financial services for the transfer and issuance of virtual currencies, will follow this trend.
Do you have questions? The BTP team of experts will be happy to advise you on the legal requirements relating to crypto currencies and fintech regulations, as well as on the legal classification of new financial services under banking and capital market laws.