Blockchain technology is currently a much-discussed topic: Bitcoin, Libra, smart contracting to name just a few buzzwords everyone is aware of. The technology has the potential to disrupt traditional industries and Germany intends to play a pioneering role in this new emerging era.
Numerous blockchain start-ups have settled in Europe’s crypto capital Berlin. Due to infrastructural and regulatory conditions, Germany and Berlin, in particular, are an ideal location for companies in the blockchain industry, many of which already operate and conduct research there. A lot of them are working on blockchain-based solutions for accelerated and safe document dispatch, smart contracting or creation of digital identity. Investors from all over the world are financing Berlin-based blockchain start-ups, some of them even already through crypto investments.
In Germany service providers offering, e.g. the exchange of cryptocurrencies in other cryptocurrencies or legal currencies typically require the permission of the German Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) to operate as financial service providers. They also have to comply with anti-money laundering regulations. The much-discussed decision of the Berlin district court of last year in which the court held that a bitcoin trader was, despite the lack of having obtained permission to perform financial services, not criminally liable, has not changed this regulatory environment.
The German Federal Government has recognized the great potential of blockchain technology in its recently adopted blockchain strategy. According to the government, this makes Germany one of the first countries to unveil a blueprint for taking advantage of the opportunities that blockchain technology offers and for harnessing its potential to advance digital transformation. According to this strategy, blockchain innovation will be heavily promoted, supported and funded and investments initiated and attracted.
In particular, the development of blockchain technology in the financial sector will be supported by liberalizing German law to facilitate electronic securities. The public offering of certain crypto tokens will be regulated and legal certainty for trading platforms and crypto depositories shall be ensured.
Berlin is the current hub for the new blockchain technology in Europe and Germany is setting the course to maintain this leading position in the future. The planned regulation of this newly emerging sector will lead to a considerable gain in public trust and growth opportunities which will likely attract more investors and entrepreneurs.