Germany updated its anti-money laundering and countering financing of terrorism (AML/CFT) regime to be consistent with the EU’s Fourth Anti-Money Laundering Directive, by imposing cryptocurrency licensing requirements effective from January 1, 2020.
The new German legislation allows banks to sell and store cryptocurrencies in the same manner as stocks and bonds to both institutional and retail investors with a license from the Federal Financial Supervisory Authority (better known as BaFin ), instead of dealing with third-party cryptocurrency custodians which are also subject to licensing requirements from BaFin.
The amendment on the directive is intended in part to ease stringent rules that prohibited banks from either offering virtual asses or providing custody services. The bill already passed Germany’s federal parliament (Bundestag) and now awaits the consensus of the 16 states.
According to Robin Matzke, a lawyer and blockchain expert who advised the German Bundestag, the new crypto custody regulation requires those addressing the German market and having control over private keys on behalf of others to get a license from BaFin, even if they hold other similar licenses within the EU.
The EU parliament in its latest report on “Financial crimes, tax evasion and tax avoidance” released in August acknowledged that cross-border cash/cryptocurrency transactions remain a very high risk in terms of money laundering, financing of terrorism and tax evasion in the EU.
That risk was exposed after a whistleblower provided information to authorities in the United States, after being rebuffed in Europe, about the world’s largest ever money laundering scandal. Dubbed the “Russian Laundromat,” the scandal revealed Danske Bank’s Estonian branch,’s processing of at-risk customer transactions worth over $200 billion, mostly originating in Russia. The EU parliament report stated that illicit proceeds from Russia were used to finance criminal activities, to weaken European democracies — their economies and their institutions — and were carried out at such a magnitude as to destabilize the European continent.
The EU report acknowledged that while transparency rules on cash controls at the EU external borders have been harmonized, rules among member states concerning cash/cryptocurrency movements within the EU’s borders varied considerably. The report concluded that the current level of coordination by countries over financial institutions, particularly in AML/CFT situations concerning cryptocurrency with cross-border effects, was still lagging. The report therefore urged member states to update their AML/CFT regimes to meet the EU-imposed deadline of January 10, 2020.
Germany’s new licensing regulations for banks to sell and store cryptocurrencies was in response to the EU directive.