The regulatory authority in Germany issued a document that showed a scheme to classify these digital assets depending on their nature.
The Federal Financial Supervisory Authority (BaFin), the highest regulatory authority in Germany, recently announced that cryptocurrencies will be part of the country’s economy. The entity is following guidelines and agreements against money laundering established by the fifth directive of the European Union. In this sense, all these digital assets will receive the name of “financial instruments”.
Since the approval of the document, all the people who own any kind of cryptocurrency must have a license issued by the Federal Financial Supervisory Authorities offices. Hence, these digital assets can operate in the European country.
Germany is known to be one of the countries in Europe that have seen cryptocurrencies as another way of exercising their economic rights. A press report was published last year to increase the acceptance of these assets. The publication noted that by 2020 some banks in the country could offer a storage service for cryptocurrencies, including some other financial services. This decision that adopts and approves the use of cryptocurrencies represents a great movement for the crypto industry in the continent.
Although the announcement does not mean that the authorities gave a legal nature to these digital assets, it will allow the free circulation of cryptocurrencies if the people have the necessary documentation. The use of these digital assets can cover most of the most common financial services such as free storage and marketing.
Cryptocurrencies are “a digital representation of value that has not been issued or guaranteed by a central bank or public body and does not have the legal status of currency or money. At the same time, crypto can represent an agreement for, or an actual exercise of, payment or investment. It can be accepted as a medium of exchange by natural or legal persons and be transmitted, stored and traded electronically”, the BaFin document says.
But there are other assets considered as “Financial Instruments”. A classification scheme for all types of cryptocurrencies accompanied the announcement to detail what other assets are “financial instruments”.
The classification will depend on the nature of the token. Some assets are considered as “investments”, others as “securities”, and others as both “securities and investments”. In this way, these digital currencies will be included as “Financial Instruments”.
Security as the Main Factor to Attract Investors
During 2017, the number of scams to obtain digital assets increased, reaching approximately USD 10,000 in robberies, as a KPMG report highlighted.
The publication highlighted that the lack of security and the vulnerability on the operation of these assets were the preponderant factor for the growth of these crimes. Investors demand greater security for the control of cryptocurrencies. Their idea is to generate the necessary confidence to join these initiatives.
This measure taken by the BaFin puts a new level of control over operations conducted with cryptocurrencies, as well as over people who want to use these assets to liquidate funds or issue payments.
The authority can issue the necessary permissions. Those companies that want to install these services to their movements must request the license of the regulator. The companies that already use these currencies for their operations can opt for permission that will be granted to them later this year.
According to the advancement of technology in Germany, 40 banks and financial institutions have already shown their interest in offering their clients a cryptocurrency protection service. Until now, these financial institutions have already made the proper request to the BaFin to comply with the current rules and boost the adoption of these digital assets safely.
By María Rodríguez