Germany’s Federal Financial Supervisory Authority, also known as BaFin, released guidelines today, categorizing digital assets as financial instruments.
The financial regulator states that virtual currencies are “a digital representation of a value that has not been issued or guaranteed by any central bank or public body 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.”
BaFin defined crypto in a way that overlaps with the definition of several entities entities including the Financial Action Task Force (FATF), which is where the classification stems from.
The guidelines noted that the broad definition of crypto was prepared as previously digital assets that are not accounting units did not fall under any of its previous categorizations.
The new classification came after the regulator updated its existing anti-money laundering (AML) laws, approving companies offering crypto custody to obtain licenses. BaFin also clarified that it will not penalize unlicensed entity already offering such services as long as they show their intention to obtain such a license by March 31 and apply for one by November 30.
The report states that more than 40 German banks are now applying for approval to digital asset custody services in the country.
BaFin stated (translated from German):
According to the wording of the regulation, it is not necessary that crypto values or private cryptographic keys that are used to hold, store or transfer crypto values are stored, managed and secured at the same time.
For the purposes of this provision, custody means taking the crypto values into care as a service for third parties. This primarily includes service providers who store their customers’ crypto values in a collective inventory without the customers themselves being aware of the cryptographic keys used.
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