New German guidelines classify crypto as “financial instruments”

• Germany’s financial regulator, BaFin, has officially classified crypto as financial instruments.
• The new classification is similar to the guidelines of intergovernmental agencies like the Financial Action Task Force (FATF).
• Crypto custodians will now be required to obtain a license from the financial regulator to offer their services in the country.

Germany’s financial regulator has released guidelines classifying crypto as financial instruments. In a recent press release, the German Federal Financial Supervisory Authority (BaFin) described crypto as:

[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.

According to the regulator, the new classification reiterates the guidelines of intergovernmental agencies like the Financial Action Task Force (FATF). It is also part of the move by the country to adopt the fifth EU Money Laundering Directive (AMLD5), which began on January 1, 2020. The AMLD5 adoption process involves making amendments to Germany’s Banking Act and Payment Supervision Services Act.

As per the new guidelines, crypto custodians will now be required to obtain a license from the regulator to offer their services in the country. Crypto custodial platforms already operating in the country without a license can apply for one till November 2020. Notably, crypto custodians already registered in other EU nations cannot simply “passport” their operating license to Germany. Instead, these firms must apply for approval to offer crypto custody services in the country separately.