New law enables german banks to sell and store cryptocurrencies in 2020

[Hydrogen]

The legislation enables banks to sell and store cryptocurrencies from January 1, 2020. Other providers will now require a German license.

The German parliament today passed a bill allowing banks to sell and store cryptocurrencies from next year.

The new legislation will come into force on 1 January 2020, and will require current custody providers and crypto exchanges operating in the country to take steps, before the end of the year, to apply for a German license.  

The law will not only put Germany, the world’s fourth biggest economy, at the forefront of regulation in cryptocurrencies, but heralds a milestone in the adoption of cryptocurrencies.  

“Germany leads the way in crypto regulation, for sure. This leads to institutional investors coming to Germany, as they want security and regulation,” Sven Hildebrandt, partner at German crypto consultancy DLC, told Decrypt. "Germany is well on its way to becoming a crypto-heaven.”

The bill was passed by the Bundestag, the lower house of the German Parliament, earlier this month,  and approved by the upper house, the Bundesrat, today.

It amends a clause in the European Union’s Fourth Anti-Money Laundering Directive that currently prohibits banks from dealing directly in cryptocurrency. It  allows them to legally sell and store cryptocurrencies, just as they do stocks and bonds, to retail as well as institutional investors.

At the same time, exchanges such as Binance and Kraken, and other digital asset custodians, will need to obtain a license from the German regulator, Bafin, if they wish to continue operating in Germany, said Hildebrandt.

In order to apply for this, companies will need a German legal entity with two directors operating in the country by the end of 2019. They also need to signal their intention to apply to Bafin for a license before 31 March 2020, and submit the application prior to 31 November 2020.

Digital asset custodians who have not established a legal identity in Germany before the end of the year will be deemed illegal by 2 January 2020, said Hildebrandt.

He said this leaves companies wishing to continue provide services in Germany with three options: to set up a German company before the end of this year, and then apply for a licence; to work with a cryptocurrency custodian who is licensed in Germany, or to work with a licence provider, which can offer a “complex but clever" solution.

Companies have already begun to act on the new German law. Crypto Storage, a subsidiary of Swiss financial services provider, Crypto Finance announced plans to open an office in Frankfurt today.

Hildebrandt said that the new law will be a major breakthrough. “If you can hold [cryptocurrencies] in your bank account, that is massive for adoption,” he said. “I believe that this will act as a role model for all the other laws that will be coming into force Europe wide. Germany is driving crypto adoption forward and wants to play a leading role in Europe as well. One of the key challenges is keeping private keys safe.”

“I believe the biggest impact will be on exchanges such as BitStamp, Kraken and Binance, who are looking deeply into this,” he added.

The proposals were also greeted with enthusiasm by Germany’s banking community.

But consumer protection watchdogs have warned that it could mean banks could aggressively pitching cryptocurrencies to uneducated customers, putting them at risk.

https://decrypt.co/12603/new-law-makes-germany-crypto-heaven

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Interesting read.

#1  This could be a testbed for a policy whereby consumers hold crypto through their bank. This could allow banks and governments to maintain control of peoples finances and crypto holdings.

#2  It could be a desperation move on the part of banks, many of which have poor financial stats and are in trouble.

#3  This could be 100% illegal. Laws made by the EU typically supersede laws made by native governments of EU states. This says the EU banned the practice:

It amends a clause in the European Union’s Fourth Anti-Money Laundering Directive that currently prohibits banks from dealing directly in cryptocurrency.

[aardvark15]

It’s smart for banks to want to join the cryptocurrency economy rather than fight it. It is inevitable that this is the direction that the people want and need to go.

[ecnalubma]

This is big step for german banks towards crypto adoption, regulation always plays a big part for crypto to be accepted in the society. This particular move by Germany will also spark interest in other European countries to implement related laws.

[exstasie]

This could be 100% illegal. Laws made by the EU typically supersede laws made by native governments of EU states. This says the EU banned the practice:

It amends a clause in the European Union’s Fourth Anti-Money Laundering Directive that currently prohibits banks from dealing directly in cryptocurrency.

I'm reading from multiple sources that the EU has proposed a revision of the fourth AML directive that removes that prohibition. That's apparently what the German law is based on:

A new proposed bill on the European Union fourth Money Laundering Directive will allow banks to buy, hold and sell Bitcoin. The amendment on the directive comes to ease stringent rules that prohibited banks from either offering virtual asses or providing custody services. The move is an excellent relief for financial institutions in the region.

Taking advantage of the new bill is the German Bundestag, which has come up with a separate law to implement the move. Although the bill requires further development, it is expected to come into effect in 2020.

https://www.fxstreet.com/cryptocurrencies/news/new-eu-bill-on-the-fourth-money-laundering-directive-allows-banks-to-hold-and-sell-bitcoin-201911290253
https://www.crypto-news-flash.com/new-law-banks-hold-and-sell-bitcoin/

I can't find a primary source for that though. I tried searching the EU Commission legislative tracker but it's really hard to use.

[darkangel11]

Looks good, but would you want that? Most people who are in the Bitcoin space now wouldn't. That doesn't mean newcomers who trust banks aren't going to be interested, but for me doing it wouldn't have any benefits. Instead of you holding your coins I'd now have to ask my bank for permission just like with fiat money.

-Dear bank, I'd like to send my coins to another country, how much will it cost and when will you be able to realize the payment?

-Dear client, your tax returns aren't due, so we are freezing your bitcoins until we get a sign from your local tax office. Also, we are freezing some of your bitcoins permanently because because they come from silk road. Have a nice day.  

 

[blckhawk]

For me though, I agree on some points. (1) It's a possible desperation move, given the fact that recent news regarding adoption of Bitcoin, cryptocurrencies, and blockchain in different applications in society, (2) It's still uncertain if it would get passed since EU's regulation and theirs are conflicting, and (3) they might advertise it aggressively to innocent clients and profit out of them using cryptocurrencies, further bringing negative image to cryptocurrencies for being a 'scam' as people might think.

[CryptoBry]

Looks good, but would you want that? Most people who are in the Bitcoin space now wouldn't. That doesn't mean newcomers who trust banks aren't going to be interested, but for me doing it wouldn't have any benefits. Instead of you holding your coins I'd now have to ask my bank for permission just like with fiat money.

-Dear bank, I'd like to send my coins to another country, how much will it cost and when will you be able to realize the payment?

-Dear client, your tax returns aren't due, so we are freezing your bitcoins until we get a sign from your local tax office. Also, we are freezing some of your bitcoins permanently because because they come from silk road. Have a nice day.  

 

There are really some rich people who prefer to have a good bank to be holding their Bitcoin, so they don't want to be victim of the hackers and commit possible mistakes that can delete their virtual assets. These people may not be millions but you don't need many people to make a viable business with this. Personally, I am taking this news as a positive one because this can directly affect the supply and demand of Bitcoin if there will be more bank customers who will opt to trust the bank they are loyal with to manage their possible digital holdings. Why many banks are also offering insurance and investment products? Because they have a large client base, and they know these people and their financial capabilities so it would be easier to reach and market to them, now the same thing can happen when they offer the Bitcoin and cryptocurrency option. This is part of the move to allow institutional money to be flowing to Bitcoin which can have a good impact on it especially long-term.

[fiulpro]

Now the government interference will be reduced to an great extent ,. When their own banks will start engaging in cryptocurrencies they will have to be nicer with the people too , it will drastically impact the sale of cryptocurrencies people will start taking into account the legality and in the upcoming years it is going to be a legal tender when people would need to accept it .
This is a big step but it's a double edged sword and if Cryptocurrency crashes , the bank will too .

[Tipstar]

European and specially German government has been positive towards cryptocurrencies from the start. Germany would be the largest economy to fully embrace crypto if they went forward with this. This would help Germany go forward in some many ways and be the new economic hub connecting crypto to fiat and east to west.

[nigelk]

This bill passed, incredible results. This may cause really intresting adoption in EU

[rose9696]

I really disagree with the commercial banks participating in this market. because transactions between wallets are out of control. Neither the central bank nor can it do that to commercial banks. If the banks are dishonest they will soon launder money in many ways and evade taxes. In my opinion this is one of the wrong decisions of the German government. What do you think ?

[Twentyonepaylots]

Looks good, but would you want that? Most people who are in the Bitcoin space now wouldn't. That doesn't mean newcomers who trust banks aren't going to be interested, but for me doing it wouldn't have any benefits. Instead of you holding your coins I'd now have to ask my bank for permission just like with fiat money.

-Dear bank, I'd like to send my coins to another country, how much will it cost and when will you be able to realize the payment?

-Dear client, your tax returns aren't due, so we are freezing your bitcoins until we get a sign from your local tax office. Also, we are freezing some of your bitcoins permanently because because they come from silk road. Have a nice day.  

 

I guess you misunderstood the idea of cryptocurrency banking. What banks will do is to sell and store cryptocurrency, meaning people will ask for them to keep their asset in form of cryptocurrency. You are wrong based on the examples you have given. First of all, you basically think of crypto banking acts like a physical exchange, it somehow does but the fact that it is regulated is so much more to compare with exchanges. Second, if people would need their money, they wouldn't be asking permission for the bank to sell it to another country, the bank itself has their money backed on the asset so it will be very a seamless transaction.

What germany did is a great move given the fact that they have a negative interest rate with their banks. This is beneficial, giving the option for cryptocurrency investment to get away with forceful spending of money by the banks.

[Yatsan]

I really disagree with the commercial banks participating in this market. because transactions between wallets are out of control.

I can't clearly understand, What do you mean by this?

Neither the central bank nor can it do that to commercial banks

If they can sell gold, stocks and insurances then why not cryptocurrency? Cryptocurrency is an emerging economic class these couple of years and seen a significant growth through time so why not?

If the banks are dishonest they will soon launder money in many ways and evade taxes. In my opinion this is one of the wrong decisions of the German government. What do you think ?

Banks will be having a license prior to digital asset servicing there is no need to talk about the taxes and money laundering since they are highly regulated. I respect your opinion but where did you based it?
Having this kind of adoption makes the Germany ahead of the game to any other countries, Even Bobby Ong is positive about it saying it will open a lot of opportunities to both its citizen and finanicial institution.

[Brunus]

I am very skeptical when I see traditional institutions entering the crypto field. Bitcoin was born with the aim of freeing itself from the power of central banks and states, not to give them an additional source of power.

[darkangel11]

Looks good, but would you want that? Most people who are in the Bitcoin space now wouldn't. That doesn't mean newcomers who trust banks aren't going to be interested, but for me doing it wouldn't have any benefits. Instead of you holding your coins I'd now have to ask my bank for permission just like with fiat money.

-Dear bank, I'd like to send my coins to another country, how much will it cost and when will you be able to realize the payment?

-Dear client, your tax returns aren't due, so we are freezing your bitcoins until we get a sign from your local tax office. Also, we are freezing some of your bitcoins permanently because because they come from silk road. Have a nice day.  

 

There are really some rich people who prefer to have a good bank to be holding their Bitcoin, so they don't want to be victim of the hackers and commit possible mistakes that can delete their virtual assets. These people may not be millions but you don't need many people to make a viable business with this. Personally, I am taking this news as a positive one because this can directly affect the supply and demand of Bitcoin if there will be more bank customers who will opt to trust the bank they are loyal with to manage their possible digital holdings. Why many banks are also offering insurance and investment products? Because they have a large client base, and they know these people and their financial capabilities so it would be easier to reach and market to them, now the same thing can happen when they offer the Bitcoin and cryptocurrency option. This is part of the move to allow institutional money to be flowing to Bitcoin which can have a good impact on it especially long-term.

How do you know? Do you have some rich friends who told you ? Did you read some interviews with rich people who said they would buy BItcoin if they were allowed to store it in the bank?
Hackers almost never target your personal computer. They hack into exchanges, banks, forums, and such. They will not trace your transactions to the source and install spyware on your devices. It's not how it works.
I'm still not convinced that this will be a popular option among fiat whales.

[Mometaskers]

#3  This could be 100% illegal. Laws made by the EU typically supersede laws made by native governments of EU states. This says the EU banned the practice:

It amends a clause in the European Union’s Fourth Anti-Money Laundering Directive that currently prohibits banks from dealing directly in cryptocurrency.

Why did they bothered with it though? Since this is in Germany maybe they already know some push to change the EU laws regarding cryptos?

If I live there I'd probably use the service to get money from my bank account into crypto but I wouldn't keep the crypto in there. The point of having crypto is to have it as an alternate asset in case banks fail, keeping it in a bank is counterproductive.

[Kyraishi]

I am very skeptical when I see traditional institutions entering the crypto field. Bitcoin was born with the aim of freeing itself from the power of central banks and states, not to give them an additional source of power.

I agree, something about these banks entering the scene seems very off. I have strong suspicious they are going to cause some shit and try and control user accounts, or try and control bitcoin in some way?

#3  This could be 100% illegal. Laws made by the EU typically supersede laws made by native governments of EU states. This says the EU banned the practice:

It amends a clause in the European Union’s Fourth Anti-Money Laundering Directive that currently prohibits banks from dealing directly in cryptocurrency.

Why did they bothered with it though? Since this is in Germany maybe they already know some push to change the EU laws regarding cryptos?

If I live there I'd probably use the service to get money from my bank account into crypto but I wouldn't keep the crypto in there. The point of having crypto is to have it as an alternate asset in case banks fail, keeping it in a bank is counterproductive.

Not everyone in the EU is very happy, for example, Britain is attempting to exit a lot of the EU trade agreements since they are quite restrictive and you get basically controlled by the majority of people in the EU, although I do believe the overall rules from the big guys at the EU supersede all ruins made by local governments.

[hugeblack]

#2  It could be a desperation move on the part of banks, many of which have poor financial stats and are in trouble.

I am inclined to the second point, all cryptos institutions operating in Germany need to reorganize and establish new companies in order to comply with the regulatory law.
I do not know how the form will be stored by banks, but it will be subject to tax regulation and under central administration completely.
Finally, people will carry out speculation and withdrawals in local currencies, which means that all crypto funds will be under central control, thus reviving those institutions.

[alyssa85]

I am very skeptical when I see traditional institutions entering the crypto field. Bitcoin was born with the aim of freeing itself from the power of central banks and states, not to give them an additional source of power.

I think what is more likely to happen is that companies like Coinbase, which already have a lot of crypto expertise, turn themselves into banks (in other words offer standard banking facilities to their existing members).

[audaciousbeing]

I am actually delighted to read about this. It just further show to the those waiting on the sidelines that bitcoin is not sustainable to begin to have a rethink. If a bill can be passed by the world forth largest economy still looking at how to further expand their economy with this, i wonder countries whose economy is nothing to make reference to would still be there flexing their muscles as to how bitcoin or crypto is the source of all their problems and how they have not been able to fix it.

As much as this news brings gladness, we should not be aware of the regulations and compliance that will surely come with it because that is what I see would be a challenging transition at this time.