The German government clarified its position regarding crypto-related issues: No fraud cases on German crypto exchanges, Bitcoin is under investigation, and the government is in favor of pan-European regulations to protect consumers.
The German government has published an official statement, explaining its views on specific crypto-related issues. This statement was published as an answer to a request for information by the centrist political party FDP.
The main reason for the request was a report by the European Securities and Markets Authority (ESMA) earlier this year, which recommended a common pan-European approach to crypto regulations.
Crypto exchanges generally not unsafe, but Bitcoin considered a potential threat
According to the government, the German financial markets watchdog Bafin has no knowledge of any market manipulation, fraud, or hacks on crypto exchanges in Germany. Regarding ICOs, the Bafin has no information about any fraud incidents other than those already published in popular news outlets.
It’s good news that the German government publicly states that crypto markets are not as unsafe as often claimed. While there have undoubtedly been security flaws in the past, the overall impression that cryptocurrencies are less safe than fiat currencies is not justified.
The government also stated that federal agencies are currently evaluating the relevance of Bitcoin and other cryptocurrencies for criminal activities, in particular money laundering, drug trafficking, and other illegal transactions in the darknet. The federal police and the government’s Financial Intelligence Unit (FIU) are analyzing the role of Bitcoin within criminal circles. A final report is expected by the end of 2019, which will recommend further actions if any.
That said, it’s unlikely this report will bring any significant legal changes. While we don’t know what exactly the use of cryptocurrencies in criminal networks looks like, their importance is likely exaggerated. A 2018 report by Japan’s National Police Agency found that money laundering related to digital currencies accounted for only 2 percent of all recorded money laundering cases.
That’s Japan, but why would it be significantly different in Germany? Well, we shall see what the police finds.
German government in favor of pan-European regulations to protect consumers
At this point, a clear legal definition of the concept of a “crypto asset” is missing in Germany. Hence, those assets that are not classified as securities under the European MiFID directive are currently unregulated.
However, the German government does not see an urgent need to create regulations for such instruments or crypto markets as a whole, because national law enables regulators to distinguish between projects that need Bafin approval and those that don’t. Each project needs to be considered separately – an approach the government feels comfortable with.
Nevertheless, the government also says in the long term, there need to be pan-European and international regulations, with the primary goal being consumer protection.
The statement didn’t include any breathtaking news, but it revealed some of the government’s views on crypto. While lawmakers don’t seem to be too concerned about cryptos, they also don’t see any urge to create a regulatory framework.
In the meantime, the industry is waiting for the government to finalize its blockchain strategy this coming summer. What can we expect? Probably a step forward, but it’s not going to be a giant step.