While it has been known for a while now that Germany has been all for national cryptocurrencies, Europe’s largest economy has made a step further by introducing a new law that will allow banks to hold cryptocurrency assets in their custody. Sources indicate that the German Bundestag (its Federal parliament) has passed a bill allowing banks to hold cryptocurrencies for their clients as custodians rather than using external custodians or subsidiaries which would have been specially created for that sole purpose.
The bill having been passed by the Federal Parliament is also expected to be approved by the legislature at the state level as well. This comes following the fourth European Union money laundering directive that addresses current challenges faced by the member bloc as regards illicit inflows and proceeds of crime as well.
Sources further indicate that the German banking association BdB described the law as a welcome development saying in a statement:
“Especially credit institutions are experienced in the safekeeping of client assets and in risk management, are committed to investor protection and have always been controlled by the financial supervision.”
This also opens up the German economy to inflows from cryptocurrency investors who may wish to keep their cryptocurrency assets and investments in banking institutions based on the wants and needs of the individual customer.
The law also will allow banks to grant their customers various cryptocurrency offerings which will give the crypto space another place to call home as many countries are still skeptical about cryptocurrencies and their underlying technologies.
This is also one of the few smart moves made by a western country on the issue as countries such as the United States are still grappling with the internal definitions of what certain types of cryptocurrencies should be in terms of either securities or commodities.
The Chinese, on the other hand, have been able to side-step the issues surrounding this and focus on the underlying Distributed Ledger Technologies (DLT) and have been able to create a new paradigm for themselves in terms of having internal ecosystems that deal with the existence of DLTs as well as a national cryptocurrency too.
What makes this law particularly unique is its definition of cryptocurrency tokens which has a series of broad implications that may create a new legal mechanism for countries still grappling with how best to define cryptocurrencies.
The new law deals with the core concept of “crypto values” which is a first-term definition under German law. This term can be categorically defined as “digital representations of a value that has not been issued by any central bank or public agency,” that can be “accepted as a means of exchange and payment or for investment purposes”.
Of course, while many argue that this limits the scope of cryptocurrencies it is the first part of this definition that broadens the scope of the definition of what a cryptocurrency can be. As such, Germany might just become the cryptocurrency haven of the west. That is if the Swiss allow it. For now, though, this has been seen as a victory for members of the crypto space.