On November 14, 2019, the German Bundestag passed a law to implement the fifth EU anti-money laundering directive. Among other things, it regulates cryptocurrencies and crypto custody transactions.
Crypto exchanges now regulated by law
The law also covers crypto exchanges which trade cryptocurrencies against FIAT currencies or trade cryptocurrencies against one another.
As “electronic wallet providers”, all crypto exchanges are now subject to the anti-money laundering directive. Since most cryptocurrency trading takes place via online exchanges, the new regulation is significant not only for the exchange providers themselves, but also for investors who use the exchanges for trading purposes.
The aim of the revised directive is to enable the authorities to monitor the use of cryptocurrencies for transactions in order to combat money laundering and the financing of terrorism.
New obligations mean extra time and effort
The anti-money laundering directive now includes the following requirements:
- duties of care,
- identity checks and
- reporting obligations.
For exchanges, this means one thing above all: more time and effort. Most of the pre-formulated contract documents will also have to be revised.
From now on, crypto exchanges will have to take particular care to meet the requirements of anti-money laundering law. Exchange operators will also have to be prepared to cooperate more closely with the authorities.
Crypto exchanges can contact BaFin without obligation
Companies wishing to conduct a business of this kind require a permit from BaFin (German Federal Financial Supervisory Authority). As certain deadlines have to be met, BaFin is already asking interested companies to send an informal and non-binding expression of interest to the following e-mail address: Kryptoverwahrung@bafin.de.
We recommend that all providers of crypto exchanges make timely preparations in order to meet the legal requirements. Our experienced attorneys will be happy to assist you.