In Germany, cryptocurrencies are generally not subject to specific regulations but to existing laws and regulations that apply to financial instruments in general. An example of this is that the sale of cryptocurrencies is subject to VAT (value-added tax) in Germany.

In terms of financial regulation, the German Federal Financial Supervisory Authority (BaFin) has issued guidelines on regulating cryptocurrencies. These guidelines state that certain activities involving cryptocurrencies may be subject to financial regulation, such as the sale of tokens that qualify as securities or the operation of a cryptocurrency exchange.

Furthermore, they cover a range of issues, including the classification of cryptocurrencies, the application of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations to cryptocurrencies, and the licensing and authorization requirements for companies involved in the cryptocurrency sector.

One of the critical guidelines issued by BaFin on the regulation of cryptocurrencies is the “Guidance on the Classification of Virtual Currencies as Financial Instruments,” which sets out the criteria BaFin uses to determine whether a particular cryptocurrency should be classified as a financial instrument.

According to this guidance, a cryptocurrency may be classified as a financial instrument if it meets the definition of a “payment transaction” or a “transferable security” under German law.

BaFin has also issued guidelines on applying AML and CTF regulations to the cryptocurrency sector. These guidelines clarify the obligations of cryptocurrency businesses and service providers to implement appropriate measures to prevent the misuse of their platforms for money laundering or terrorist financing purposes.

Finally, BaFin has established licensing and authorization requirements for companies involved in the cryptocurrency sector, including requirements for obtaining a license to operate a cryptocurrency exchange or to provide other cryptocurrency-related services. These requirements ensure that companies operating in the cryptocurrency sector are subject to appropriate oversight and supervision.

BaFin has also warned consumers about the risks associated with investing in cryptocurrencies, including the fact that they are highly volatile and may not be suitable for all investors. It has also warned about the potential for fraud and other risks associated with investing in cryptocurrencies.

If you require further advice regarding the regulation of cryptocurrencies in Germany, please do not hesitate to contact us directly.

BaFin also regulates crypto businesses in Germany as it is responsible for regulating and supervising the German financial markets, including the cryptocurrency sector.

Companies must obtain a related license or authorisation from BaFin to operate a cryptocurrency business in Germany. The nature of the permit will depend on the essence and goals of the company.

If a company operates a cryptocurrency exchange, allowing users to buy and sell cryptocurrencies, they must obtain a license from BaFin. This process involves the company demonstrating that they have the required controls in place to prevent money laundering and terrorist financing and protect user assets, and ensure the proper functioning of the exchange.

Following receiving the application, BaFin will review it and the supporting documents to ensure that the company meets the necessary standards. If the company is suitable for licensing, BaFin will issue a license, subject to certain conditions, including ongoing requirements, such as maintaining certain capital levels and reporting certain information regularly to BaFin.

BaFin has also issued several guidelines on regulating cryptocurrencies in Germany, which provide further detail on the requirements and expectations for companies operating in this sector. These guidelines cover a range of issues, including the classification of cryptocurrencies, the application of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations to cryptocurrencies, and the licensing and authorisation requirements for companies involved in the cryptocurrency sector.

The application processes and maintaining the company to the required standards can be time-consuming. However, with the assistance of our legal experts, your company can be assured that its dealings are in safe hands. If you require our service, please do not hesitate to contact us directly.

At Schlun & Elseven Rechtsanwälte, our legal team is available to advise crypto businesses across Germany in many ways. As a full-service law firm, our business clients can receive all their legal services under one roof by working with our professionals.

Some examples of how our lawyers can support your crypto business include the following:

• Legal and regulatory issues: Our team advises on the legal and regulatory matters that crypto businesses may face in Germany. These services include obtaining the appropriate license or permit from BaFin and applying anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
• Drafting and reviewing contracts: Our contract lawyers assist crypto businesses with drafting, analysing and reviewing contracts, including service agreements or terms of use, ensuring that they are legally enforceable and protect the company’s interests.
• Intellectual property: With a dedicated intellectual property team, we advise clients on intellectual property issues that may arise in the crypto business, such as copyright law, trademark registration or protecting proprietary technology.
• Employment law: Our certified specialists in employment law can advise your business on employment contracts, terminating employment, employee representation with company decision-making, negotiating severance packages and implementing anti-discrimination and bullying policies.
• Compliance: Crypto businesses are often subject to complex compliance requirements, mainly as the law develops in this field. By working with us, we can ensure that the company remains compliant with relevant laws and regulations.
• Representing the business in legal proceedings: Our litigators represent crypto businesses across Germany, including customer disputes or regulatory enforcement actions. Our team can also advise your business regarding its options with dispute resolution mechanisms such as arbitration.

Our lawyers provide valuable guidance and assistance to crypto businesses in Germany, and we aim to assist them in navigating the complex regulatory environment. Your company can benefit from all these services and more by working with us directly.