With the bulk of Europe’s crypto-asset markets regulation (MiCAR) coming into force at the end of this year, Germany finds itself in a special position. Due to its failure to pass certain laws, German companies cannot obtain MiCAR crypto licenses from local regulator BaFin. But foreign companies licensed elsewhere are free to operate in Germany and throughout the EU.
Europe has implemented MiCAR as a regulation so that it applies as is throughout the European Union. This contrasts with a European directive which would require each country to implement it in their national legislation. Given that MiCA is a regulation and therefore already applies in Germany, why does it matter that Germany’s ruling coalition collapsed earlier this month?
Some details of MiCA are country specific. For example, each country must designate a regulatory body responsible for issuing licenses to crypto asset service providers (CASPs). This would be BaFin in Germany. Except that the designation of BaFin is part of a bill which has not yet been voted on. And given the collapse of the government coalition, its adoption in the near future is unlikely.
This also impacts banks, as institutions such as banks or securities companies can extend their licenses to qualify as a MiCAR CASP. BaFin cannot do that at the moment. Additionally, Germany had crypto regulations predating MiCAR. The bill provided that already licensed companies could continue operations and reapply for a MiCAR license in the coming year.
German crypto legislation: KMAG
A first draft of the Financial Markets Digitization Act (FinmadiG) was published in October 2023 and introduces the Crypto Market Supervision Act (KMAG), the legislative text that supplants the old German crypto rules with MiCAR.
Earlier this week, a group of German academics wrote a letter to the Finance Committee of the German Bundestag, pointing out that Germany is violating EU law. A German implementing law should have been in force on June 30, when the stablecoin (electronic money token) legislation came into force.
“The German supervisory authorities BaFin and Bundesbank currently do not have sufficient authority,” they write. “Without German implementing legislation, many legal bases are missing and legal uncertainty exists. Jobs would be created in other countries in the future.
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