The Fifth European Money Laundering directive came into effect January 1st, which updates a fourth EU Money Laundering Directive to include crypto services. The law would allow for the sale and custody of Bitcoin and other cryptocurrencies across the EU, including Germany.
Up to date, almost no German institute offered its customers virtual assets, but the new law is likely to change all that. The update gives banks permission to treat bitcoin, or ethereum as stocks or bonds, allowing them to also to offer related fintech services to customers.
The passing of the law has created a rush to market with 40 licensed banks already applying to offer crypto custody and services. While the names of the banks have not yet been released, the applicants say the aim is to make Germany a go-to location for crypto services.
The law also applies to tokens, as it defines cryptos very broadly as “digital representation of value that has not been issued by any central bank or public agency,” but is “accepted as a means of exchange and payment or for investment purposes.”
That means banks can now offer the buying, selling, and storing of bitcoin and ethereum or tokens, just as they would for stocks and other assets. This is an important distinction from the already-existing concept of e-money present in German law. However, the law makes no mention of distinguishing between security and utility tokens, with regulators previously stating that they would evaluate such cases on a case-by-case basis.
The incoming bill would further enable investors to invest in cryptos via Germany-based funds instead of being forced to put their money abroad, according to the BdB. The passing of the new law highlights the expanding growth of such markets within the banking industry, as well as the growing need to produce legislation that outlines the regulatory measures that define the underlying legal framework for such products and services.