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Bitcoins and Criminal Law

The Federal Financial Supervisory Authority (BaFin) considers bitcoins to be units of account and thus financial instruments within the meaning of the German Banking Act. Accordingly, whoever operates banking transactions or financial services with bitcoins commercially or to an extent, which necessitates a commercially established business enterprise, must be licensed by the BaFin.

Anyone who does not have this license and operates transactions subject to authorization is liable to prosecution according to Section 54 German Banking Act.

German Bitcoin regulation creates obstacles

In particular, trading in one’s own name and for one’s own account subject to authorization constitutes a risk. BaFin also presumes that the purchase and sale of bitcoins should in principle be permission-free, assuming one participates in the existing market solely. If additionally this market is co-created or promoted, however, trading for one’s own account could be given. Under certain circumstances this would already be the case, if one advertises to regularly purchase and to sell bitcoins. It can also be regarded as trading for one’s own account, for example, if regular offers of purchase and sale at self-set prices are made in a multilateral trade system. In the view of BaFin, a commercial nature exists if the operation is created for a certain duration and is pursued with profit-making intention. A commercially established business would already be necessary starting from 25 transactions per month on average.

Investigations against a commercially established Bitcoin business

Even if an evaluation can only be made in the individual case, it must be pointed out that the BaFin and the public prosecutors are inclined towards strict interpretation and under certain circumstances begin investigations against the parties. Considering this, one’s own bitcoin transactions should be closely examined. An expert attorney should be consulted no later than at the initiation of investigation proceedings.

Read more on:
Bitcoin and the German regulation authority BaFin
Bitcoin and Tax

Benjamin Kirschbaum

Attorney Benjamin Kirschbaum, based at our Berlin office, mainly works on matters relating to blockchain and cryptocurrencies. In this field, he offers our clients comprehensive advice on all aspects of tax law, financial supervision, and civil law. In addition, Benjamin Kirschbaum works on matters relating to general civil law, administrative law, canon law and the law on religions.

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