Germany: Proposed Bill Set to Introduce Cryptocurrencies at Local Banks

Cryptocurrencies might get the same treatment as fiat money in Germany. A newly introduced bill hints at authorities looking to allow German banks to sell cryptocurrencies and provide custody solutions.

According to local news agency Handelsblatt the new bill was proposed for voting in the Bundestag, the German parliament and has seen positive reception. Now, it requires consensus across the country’s 16 federal states to be successfully implemented.

As it stands, banks and financial institutions are restricted from allowing transactions related to cryptocurrencies for clients. The proposed legislation, if approved, will make a monumental difference for cryptocurrency availability in the country.

If the states agree upon the legislation, German citizens will be able to buy and hold Bitcoin, Ethereum, along other cryptocurrencies directly with their banks. The whole spectrum of banking services might be available for cryptocurrencies as well.

Banks have been eager to get into the cryptocurrency industry as the interest for digital currencies seems to be mounting both from consumers as well as governments and corporations. The bill is set to be implemented in 2020, as Handelsblatt outlines:

“​​Starting in 2020, financial institutions will be able to offer their customers online banking, virtually at the touch of a button, along with classic securities such as stocks and bonds, as well as cryptocurrencies.”

The new legislation has seen wide support and enthusiasm from the domestic industry. The Association of German Banks — a major lobbying group representing over 200 financial institutions — is a huge advocate of the bill, arguing that established financial institutions have the experience and risk mechanisms in place to safeguard client assets.

In October, the Association released a paper arguing that the European economy may benefit from a programmable digital euro.

At the same time, there have been mixed signals towards cryptocurrencies from various governments. The Bundestag has recently shared an opinion that cryptocurrencies such as Bitcoin are not real money, citing their volatility and allegedly limited use for payments. Concurrently, nation states have been quick to dampen the development of Facebook’s stablecoin, fearing a potential disruption of the existing monetary system.

The European Central Bank has also been stringent on digital currencies, stating that global stablecoin payments raise potential risks across a broad range of policy domains, which is the primary objective of a central bank.

German Politicians Push For Legal Framework for Cryptocurrencies

Most recently, German parliamentary representatives have put forth new suggestions for an appropriate legal framework for cryptocurrency trading as well as token granting, as they believe it would encourage the industry’s domestic development.

Politicians Recognize the Potential of Blockchain

The proposal was suggested at a public hearing hosted by the Bundestag’s Finance Committee on March 11th. The latest public hearing was scheduled to discuss the opportunities that blockchain can offer the country and how to turn it into a financial and business hub.

Union parties’ Antje Tillmann and colleague Matthias Hauer brought up the subject as they believe that Germany should not be left behind as blockchain begins to change the nature of finance in the coming years. According to their statement, whilst the industry is still in its nascent phase, they believe that blockchain technology is bound to make a significant and effective impact as a base technology for national digitization strategies across multiple fields, therefore the groundwork for its future implementation should be laid today.

In their joint appeal, they brought up both the current as well as the future state of the industry.

Both representatives reassessed the government’s projects up until now and commended their efforts for supporting pilot projects across the electro-mobility sector as well as electricity trading projects and projects for the Federal Office for Migration and Refugees.

Germany Doesn’t Want to Miss Out on the Trend

However, Tillman and Hauer stated that the efforts of the government should be increased. With an increasing outflow of blockchain startups to European as well as non-European countries, financing rounds (ICOs) are taking place almost exclusively abroad. Presently, ICOs are not fully regulated in Germany, and are generally treated as securities by regulators yet there is no clear rule on how to create an ICO in Germany so far.

Respectively, creating a good environment for startups to operate in the country, would lead to more investment and more opportunities for Germany to become a leader in the field.

Tillmann and Hauer claimed that in order to stay at the forefront, the government needs to lay out clear regulations for cryptocurrency and token trading to crypto trading, stating that “the potential of blockchain technology can only be fully realized if there is legal certainty and potential risks are mitigated. The goal must be to retain the entire added value of this promising technology in Germany and to develop our country into a pioneer of the blockchain economy.

Meanwhile, Germany’s justice and finance ministries have come out with a proposal to launch a state-run register to regulate the blockchain sector and protect investors from possible abuses. It is expected that the government will introduce a nationwide blockchain strategy within the first half of 2019.