On March 2, 2020, Germany's Federal Financial Supervisory Authority (BaFin) made a decision about the legal status of cryptocurrencies in its financial system. The decision was made because of the Fifth European Money Laundering Directive (5AMLD). The 5AMLD makes it necessary for:

• cryptocurrencies, such as Bitcoin, to have a legal definition
• cryptocurrency currency platforms and wallet providers to be regulated

Before this decision:

• a cryptocurrency had no legal definition in Germany
• there were no regulations for companies that gave cryptocurrency financial services, such as ATMs

Here is a summary of the decision by BaFin. Cryptocurrencies are financial instruments pursuant to the German Banking Act (Kreditwesengesetz – KWG). They are defined as:

• digital representations of value that is
• has not been issued or is guaranteed by any central bank or public authority, and
• does not have the legal status of a currency or money but
• natural or legal persons on the basis of a
  • agreement or actual exercise as a
  • exchange or payment method is accepted, or
  • investment purposes and the
• transmitted, stored and traded electronically

Thus, a cryptocurrency is legal tender that is stored electronically and can be used as security. Because of this decision, it is necessary for all companies that work with cryptocurrencies to have a license. A company must get a license before November 30, 2020 to continue to operate.

At this time, some companies giving cryptocurrency financial services will not be penalized. To continue to operate, a company must show their intent to get a license before March 30, 2020. But this leniency did not apply to KKT UG. BaFin told KKT UG to immediately close their ATM business. According to Bloomberg, the company does not have the necessary authorization for cross-border proprietary trading.

To make cryptocurrency a legal financial instrument and to apply financial service regulations to a company that holds and transacts cryptocurrencies makes a secure ecosystem. The goal is to make Germany an attractive location for reputable crypto companies.