As the bulk of Europe’s Markets in Crypto-Asset Regulations (MiCAR) come into force at the end of this year, Germany is in a peculiar position. Because of its failure to pass some legislation, German companies cannot be granted MiCAR crypto licenses by local regulator BaFin. But foreign companies licensed elsewhere are free to operate in Germany and throughout the EU.
Europe implemented MiCAR as a regulation so that it would apply as it stands throughout the European Union. That contrasts with an EU directive that would require each country to implement it into national law. Given MiCA is a regulation and hence already applies in Germany, why does it matter that Germany’s ruling coalition collapsed earlier this month?
Some MiCA details are country specific. For example, each country has to designate a regulatory body to issue licenses for crypto asset service providers (CASP). That would be BaFin in Germany. Except that the designation of BaFin is part of a draft law that has not yet been passed. And given the collapse of the government coalition, its passage any time soon is unlikely.
This also impacts banks, because institutions such as banks or securities firms can extend their licenses to qualify as MiCAR CASPs. BaFin can’t do that at the moment. Plus Germany had crypto regulations that predated MiCAR. The draft law provided for those companies already authorized to continue activities and re-apply for MiCAR licenses over the coming year.
The German crypto legislation: KMAG
A first draft of the Digitalisation of the Financial Markets Act (FinmadiG) was published in October 2023 and introduces the Supervision of Crypto Markets Act (KMAG), the piece of legislation that supplants Germany’s old crypto rules with MiCAR.
Earlier this week a group of German academics wrote a letter to the German Bundestag Finance Committee, highlighting that Germany is in violation of EU law. A German implementing law should have been in force on June 30, when the stablecoin (e-money token) legislation came into force.
“The German supervisory authorities BaFin and Bundesbank currently do not have sufficient authority,” they wrote. “Without a German implementing law, numerous legal bases are missing and legal uncertainty exists. Jobs would be created in other countries in the future.”
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