The German Federal Financial Supervisory Authority (BaFin) in Germany classifies cryptocurrencies as financial instruments. The financial regulator also requires service providers who store, manage and secure crypto assets for their customers to obtain a license, according to a press release on March 2, 2020,
BaFin Creates a Broader Definition of Cryptocurrencies
Per the press, BaFin has created a broader definition of cryptocurrencies and considers these assets as financial instruments. In the same vein, crypto custody is a financial service. Accordingly, the financial regulator defines cryptocurrencies as digital representations of a value that have neither been issued nor guaranteed by the central bank or public body.
BaFin also outlined:
“And is not necessarily linked to a currency specified by law and that does not have the legal status of a currency or money, but is accepted as a medium of exchange by natural or legal persons and can be transmitted, stored and traded electronically.”
Service Providers are Financial Service Institutions, BaFin Notes
Further, BaFin noted that service providers offering an exchange of crypto for fiat or crypto are financial service institutions. The same applies if these providers exchange fiat for crypto. Consequently, these service providers are subject to money laundering law since cryptocurrencies are financial instruments.
On the other hand, BaFin goes on to outline the requirements for companies in the crypto space. Throws more light on requirements of service providers that store, manage or secure crypto assets on behalf of their customers. One of such is that they must obtain a license. Nonetheless, these requirements offer companies in the space more precise guidelines to follow.
BaFin Says its Classification is Inline with that of the FATF
What’s more, BaFin noted that its new classification is in line with that of the Financial Action Task Force (FATF) and other intergovernmental agencies. The classification is also a step in the right direction to adopt the fifth EU Money Laundering Directive (AMLD5). The AMLD5 mandates banks to offer financial services to crypto companies as long as the latter meets the FATF’s requirements.
That aside, there have been more significant moves to offer more clarity to companies in the crypto space. On February 28, 2020, BTCNN informed that Abu Dhabi’s financial regulator has amended its crypto regulations to align with the Financial Services Regulator Authority (FSRA) and the Financial Action Task Force (FATF) standards.