Proposed German Law Says Banks Could Soon Be Crypto Custodians

A proposed change to legislation in Germany could allow banks in the country to facilitate the sale and custody of digital assets, including Bitcoin. German news media outlet Handelsblatt reported that the proposal comes as part of a bill that would implement the fourth EU Money Laundering Directive.

If the law is successfully put onto the books, “​​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 Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term,” the report said. “The law also provides for further relief, such as extended application deadlines for the necessary license.” (Translated quote.)

The bill has allegedly already passed through the Bundestag, the country’s federal parliament, and is now awaiting consensus from the country’s 16 states.

Currently, German banks and financial institutions are barred from facilitating the sale of digital assets to their clients. However, the passage of the bill could place Germany in the lead in the global race to create the next cryptocurrency industry hub.

Sven Hildebrandt, Head of Distributed Ledger Consulting, told Handelsblatt that “Germany is well on its way to becoming a crypto-heaven. The German legislator is playing a pioneering role in the regulation of cryptocurrency.” (Translated quote.)

Banks would not be required to rely on third-party custodians

The latest version of the proposed law does not have a separation clause, a factor that was present in an earlier version of the bill.

According to Handelsblatt, the separation clause stipulated that “the re-regulated crypto-surplus transaction - i.e. the storage of Bitcoin and Co. - should not have been offered from the same legal entity as other regulated banking transactions. Banks should have had recourse to external custodians or special subsidiaries.” (Translated quote.)

However, the absence of the clause from the latest version of the bill means that banks would not be required to rely on third-party custodians to store digital assets.

Association of German Banks supports the newest version of the bill

The newest version of the bill has also reportedly received support from the Association of German Banks (a lobbyist group that consists of over 200 German financial institutions). The Association stated that financial institutions are particularly well-suited to handle the responsibility associated with running a cryptocurrency firm.

“Especially credit institutions are experienced in the safekeeping of client assets and in Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term, are committed to investor protection and have always been controlled by the financial supervision,’ the Association stated. (Translated quote.)

In late October, the Association of German Banks called for the creation of a digital euro.