The Federal Financial Supervisory Authority, BaFin for short, supervises and controls all areas of finance in Germany within the framework of financial supervision – at least this is what Wikipedia says. It is therefore obvious that the crypto-economy falls under the jurisdiction of BaFin. Its reputation, at least among many blockchain start-ups and crypto investors, is, however, only moderate. But why? And what can the BaFin do in this context?
One accusation that is often made against BaFin is that it tends to have a negative attitude towards the Bitcoin secret
Consumer warnings against Bitcoin secret support this image of a skeptical authority. Many forget thereby: It is the duty of every regulatory authority to draw attention to risks. If it does not do this, it will be in greater need of explanation to the Ministry of Finance and the government. It would be completely untrustworthy if an authority were to call on the population to invest in such assets. The same applies to central banks and other public institutions around the world, all of which have communicated the risks of crypto-trading and Bitcoin secret. It is therefore wrong to accuse an authority of being negative about an asset simply because it issues a risk warning – unfortunately it is not that simple.
BaFin is too strict
It should be noted here that BaFin does not make any laws, but only implements them. Its room for manoeuvre is therefore limited to the interpretation of existing law. Nevertheless, it is not an exhilarating statistic if there is only one blockchain startup in Germany that has managed to obtain a BaFin licence (Bitbond) and there has not yet been a regulated ICO on German soil. So the question is: Is the blockchain start-ups lacking in competence or is the BaFin trying to avoid decisions?
There is no simple answer here either. The BaFin itself understands the subject of block chains and crypto currencies very well. There is also no law that forbids ICOs or the release of tokens. One challenge that is being fought against, however, is the differentiation between utility and security tokens – a topic on which we have often reported. The debate about token categorization is currently leading to heated discussions around the world. Accordingly, the BaFin is afraid of a decision. This impression at least comes to mind when talking to blockchain start-ups that have to wait a long time for answers and requests. If you do nothing, you don’t make any mistakes – at least as far as decisions are concerned, this mantra unfortunately seems to be far too popular with the Financial Market Authority.
Time is of the essence
Especially small jurisdictions such as Liechtenstein or Gibraltar benefit from the hesitation of a BaFin or other financial market supervisory authorities in other, larger European countries. In countries like Gibraltar, the mills do not grind so slowly. Short distances allow a quick implementation of crypto-friendly regulatory guidelines. Although this is initially negative for Germany, Germany cannot be compared to a country that is only a few football pitches in size and can be described in the broadest sense as a tax haven – the EU or not.
The question here is: Do the adopted regulatory guidelines allow an adaptation or testing of a new technology or do they only further restrict it? In the first case, it is desirable that an authority hastens with its decisions and shows courage. If, on the other hand, there is a tendency to regulate something prematurely in such a way that innovation is nipped in the bud, then in many cases it is advisable to ignore the issue of regulation for the time being.
Germany is not Gibraltar
A country like Germany cannot be compared to a British overseas territory on the Spanish border. Stricter regulation is not only a disadvantage. Regulation made in Germany could fully exploit its advantages, especially in terms of legal certainty and consumer protection, since companies can rely on the German state or the German jurisdiction. If the BaFin says something, then it carries weight. This reliability and the high requirements that have to be met in Germany help companies to establish stable business relationships with banks. In countries with lower regulatory requirements, one or two crypto startups had to experience that the business relationship with the bank was terminated because the bank got cold feet. Such a scenario would be in Germany at e