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German crypto companies will require BaFin license as of next year

Jul 30, 2019

Starting from next year, new regulation in Germany will require cryptocurrency companies to obtain a license issued by the Federal Financial Supervisory Authority (BaFin). Crypto derivatives will not fall under these regulations, but remain subject to the ESMA’s current restriction and any future proposals by the BaFin regarding the sale of these instruments to retail investors.

Based on the new AML (Anti-Money Laundering) regulations that will come into effect, crypto companies working in Germany will be required to apply BaFin for the license by the end of 2019.

According to the Fifth Money Laundering Directive (AMD 5) crypto assets will be classified as "financial instruments". This wide-range definition of financial instruments covers not just cryptocurrencies but many related-assets as well, particularly security tokens.

In addition, cryptocurrency-related businesses, such as exchanges and wallet providers, also to be licensed by BaFin and comply with AML regulation, since these are also related to businesses operating with financial instruments. According to local media FAZ, Bundestag Free Democratic Party Frank member Schäffler submitted comments suggesting that the authorities are hurting local innovation and pushing crypto companies to move to other EU states.

German regulators are seeking to increase control of cryptocurrencies and related assets by including EU anti-money-laundering rules into the national regulations.

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