Be it Euro or Crypto, Bitwala secures your wealth with the best legal setup available under German banking laws. That includes legal guarantees for Euro funds up to 100,000 Euro and other safeguards provided under the German banking regulation.
Winheller is the law firm that has helped Bitwala bring blockchain banking online. We sat down with Sebastian Foerste to explore the firm’s role in this journey.
Why is it important for Bitwala to have a liability umbrella for business requiring a license through its cooperation with solarisBank?
In order to be allowed to conduct banking business in Germany, you either need an authorisation from the Federal Financial Supervisory Authority (BaFin) or you partner up with a bank. As Bitwala wanted to put their product on the market as quickly as possible, they chose the second and faster path. In addition, the cooperation enables Bitwala to benefit from solarisBank's partner network and their long-standing experience in the banking business.
What is the basic legal framework for trading bitcoin in Germany?
Crypto trading requires authorisation from BaFin. For customers, this means much more security as BaFin supervises crypto trading. For example, the authorities verify whether the customers' money is stored in compliance with the legal requirements and whether bitcoin is purchased and sold correctly.
However, single bitcoin purchases by an individual or a company are not subject to authorisation. An authorisation will only be required if you want to sell or purchase bitcoin to or from other people on a regular basis. In Germany, no company is allowed to operate Bitcoin ATMs or cryptocurrency exchanges without an authorisation from BaFin.
And in comparison with other countries in the EU?
In other EU countries, no authorization is required for crypto trading. However, the risk involved for buyers is greater as operators/buyers are not supervised there. Because companies abroad don’t need an authorization, the cryptocurrency sector is more advanced there. For instance, there are crypto exchanges in most EU countries and Bitcoin ATMs in larger cities. Some countries have already introduced specific legislation on cryptocurrencies allowing to conduct Initial Coin Offerings in a legally compliant way.
Does this also apply to other cryptocurrencies - besides bitcoin?
Yes, these principles basically apply to all cryptocurrencies. The situation is different, however, when security tokens are concerned. These are subject to regulation in most countries. In general, a securities prospectus will have to be drawn up before selling them. Germany and other EU countries have different approaches to regulating bitcoin and cryptocurrencies. However, when it comes to security tokens, regulation in the EU is uniform.
What is the future of regulatory requirements in Germany and in the EU?
So far, regulators have been hesitant and each country is waiting to see what the others will do. However, I expect that the EU will adopt uniform standards for the regulation of cryptocurrencies in the medium term. As this is likely to take some time, I think that the German legislator will take action on its own this year. Some market observers fear that cryptocurrencies might be completely banned. I do not share that view: bitcoin and other cryptocurrencies have already proved successful in many areas even though we are still only at the start of their development.
In October 2018, the Supreme Court (Kammergericht) of Berlin (which is comparable in status with the higher regional courts of other German states) ruled, in an individual case, that no authorisation requirement existed for trading bitcoin.
Does this mean that bitcoin trading is now allowed in Germany even without a banking license?
No one can tell that for sure. It is a fact that the Supreme Court of Berlin has ruled that trading in bitcoin is no criminal offence in Berlin. However, a higher regional court of another German state may take a different decision and it is still completely open on how the Federal Supreme Court would decide.
On the other hand, BaFin has already announced that they will maintain their opinion (forbidding unauthorised bitcoin trading).
As a result, BaFin will send cease and desist orders to anyone engaged in the banking business or providing financial services without its authorisation. For example, anyone installing a Bitcoin ATM must expect BaFin to remove it, and anyone operating a crypto exchange will expect BaFin to block the website and close their offices.
Although it is possible to object to these measures before the administrative courts, it remains completely open how these courts will decide. With that in mind, we recommend our clients to continue to obtain an authorisation from BaFin so as to be able to build up their business in peace without worrying about cease and desist orders from BaFin.
We are proud to offer the first of its kind blockchain banking experience. In accordance with the German banking laws, all user funds held in Bitwala accounts up to €100,000 are protected under the German Deposit Scheme. At the same time, all bitcoin deposits are held in user controlled wallets, meaning that no 3rd party can get access to them, including Bitwala. Get your Bitwala account today!