News - Here's how Germany plans to implement the MiCA

By Luc Vesters

Here's how Germany plans to implement the MiCA

Laws and regulations
Scams, crime and fraud

When the MiCA in July 2023 went into effect, Crypto Europe celebrated the regulation as a milestone. After years of discussions, prohibition debates and compromises, the first unified legal framework for crypto providers was finally established. Since then, preparations in the European Union have been in full swing. So too in Germany. The Federal Ministry of Finance (BMF) even wants to create new laws for this now. Lawyer Hagen Weiss, spoke with BTC-ECHO: While he welcomes the initiative, he also fears that companies will leave the country if licenses are not granted more quickly.

One of the key points of the traffic light government is the central modernization of Germany. Whether in the energy sector, railroads or the economy, the Federal Republic must "dare to make more progress" - including in the financial sector. "We are making European financial market supervision legislation suitable for digitalization and complex corporate structures," according to the coalition agreement between the SPD, the Greens and the FDP. This also requires "common European supervision" for the crypto sector.

The European Union laid the groundwork for this in July 2023 when MiCA (Markets in Crypto Assets) was officially adopted. The regulation provides the crypto sector in the EU with a unified framework for Bitcoin, Ethereum and Co. for the first time. Licensing requirements, strict separation of customer and corporate funds or the mandatory publication of white papers are just some of the new rules that crypto providers must abide by.

More powers for BaFin

Since MiCA came into force, EU member states have been implementing the regulation. In Germany, too, preparations are in full swing. For this, the federal government not only wants to amend existing laws, but also create new ones. One of these is the "Crypto Market Supervision Act" (KMAG). The Federal Ministry of Finance released a draft bill for discussion last week.

The regulations primarily affect crypto service providers and are intended to better protect investors from fraud. "Ultimately, it involves new rules for crypto assets, as well as related issues of anti-money laundering and cybersecurity," Hagen Weiss explained to BTC-ECHO. The attorney at the business law firm Dentons oversaw MiCA's creation process for many years. He welcomes the fact that separate laws are now being created to implement the EU regulation: "This recognizes that crypto assets have a special position in the digital asset market."

One focus of the new regulations is for the BaFin, for example. Until now, the German stock exchange regulator had too little leeway to actively act against fraud in the crypto sector. This should change with the KMAG. This gives the BaFin "specific powers," including sanction possibilities to punish irregular activities, Weiss explains. However, the lawyer further stresses the importance of "not just seeing problems," but working proactively with the companies.

"More speed with permits"

Although Germany must implement European requirements with the law, it certainly has leeway in its design to make itself more crypto-friendly, Weiss said. One key point: There needs to be more speed in issuing permits. BaFin has been authorizing companies to store cryptocurrencies for nearly two years. In a way, the so-called crypto custody license is a precursor to MiCA. Consequently, applications to the exchange regulator are piling up and so far only a handful of applicants have received approval.

Therefore, Weiss demands, "You have to offer both crypto startups and established institutions with crypto ambitions a quickly implementable, clear and attractive licensing perspective." Ultimately, "nobody benefits" if crypto companies from other European countries enter the German market and Germany's digital economic power falls away, the lawyer said.

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