New AML rules to require licenses for German crypto firms from 2020

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Cryptocurrency businesses in Germany will be soon required a license to operate lawfully, coinciding with the introduction of more advanced anti-money laundering (AML) regulations.

The licenses will be issued by the Federal Financial Supervisory Authority, known locally as BaFin, which will become a legal requirement for cryptocurrency businesses from January 1, 2020, Faz reported.

The licenses come into force to bring clarity to the German cryptocurrency sector, with cryptocurrencies legally considered a financial instrument from the start of next year. In order to obtain the licenses, operators will have to meet the requirements of the regulator, as well as adhering to the new anti-money laundering provisions.

Some opposition politicians have slammed the move, suggesting the higher burden of regulation will push some operators into other European Union states.

However, many within the industry, the legal profession and academia have welcomed the move, as bringing essential clarity to the industry, which will help foster innovation and development within the sector.

Christian Schmies, partner at law firm Hengeler Mueller, told the news outlet that regulation would support growth in the cryptocurrency industry, and would help encourage institutional investors to more fully embrace the technology.

He explained, “…the technology has not yet been accepted by institutional investors because a reliable legal framework is missing.”

German regulators have been unusually supportive of Facebook’s Libra cryptocurrency projects in recent weeks, despite stern opposition from other regulators on the continent and elsewhere.

The German Central Bank, for example, suggested that while there was regulatory uncertainty and risk around the project, the potential benefits of Facebook’s stablecoin should not be suppressed.

While this remains a minority view amongst global financial regulators, it shows German authorities are taking a closer interest in developments in the wider cryptocurrency sector, which some analysts have suggested indicates a greater willingness to support the growth of crypto and blockchain industries.

In announcing the new licensing requirements, the German regulator will now provide a standard, certain set of requirements for crypto businesses operating in the country, while providing a gateway for firms to trade throughout the EU.