Crypto Assets vs. Units of Account – Are Units of Account Still Relevant in the Context of Supervisory Law?

(For German version click here)


The world’s first cryptocurrency became reality with the publication of the first Bitcoin client in early 2009 and the verification of the first block of the Bitcoin blockchain. The disruptive innovation that enabled users to transfer units of value between each other without the necessity of a centralized settlement intermediary had the potential to circumvent the traditional financial payment system and therefore, at the time – shortly after the banking crisis of the years 2008/2009 – not only sparked general enthusiasm but also reservations from banks, governments and supervisory authorities. These reservations were based on the concern of the aforementioned institutions that cryptocurrencies would be primarily used for money laundering, terrorism financing, blackmailing and other criminal activities. For these reasons, BaFin as the competent authority for financial supervision in Germany, qualified Bitcoin and comparable cryptocurrencies in 2013 publicly as units of account which are regulated as financial instruments pursuant to the German Banking Act (KWG). For the German jurisdiction this ensured that the commercial dealing with cryptocurrencies required a prior BaFin authorization of the respective service operator to engage in banking or financial services.

What are Units of Account and Which Cryptocurrencies Are Qualified as Such?

According to the administrative practice of BaFin, units of account are units of value that are comparable to foreign exchange but not denominated in a legal tender, comparable to complementary currencies and which are used in regional or private payment systems as a means of payment. According to BaFin, the qualification of a unit of value as a unit of account in the supervisory sense does not require a central issuer that issues the units. Following these requirements, the administrative practice is only applicable to cryptocurrencies including Bitcoin that are based on a decentralized concept and are intended to be used as an alternative means of payment. Even though this applies to numerous cryptocurrencies, there are also cryptocurrencies that are e.g. intended as investment vehicles or as an access authorization voucher.

Crypto Assets as New Category of Financial Instruments Since January 2020

After the High Court of Berlin ruled in autumn of 2018 during a criminal proceeding and therefore not bindingly for BaFin, that BaFin’s qualification of Bitcoin as a unit of account was unlawful, the German legislator decided to introduce a new category of financial instruments to the KWG, going in effect on the 1st of January 2020. Crypto assets are since defined as digital representations of value that are neither issued nor guaranteed by a central bank nor any other public authority and that do not possess the legal status of currency or money, but are accepted by natural or legal persons as a means of exchange or payment on basis of an agreement or actual practice or which serves investment purposes and which can be stored, traded and transferred electronically. Blockchain units which are designed to serve investment purposes can therefore also qualify as crypto assets.

What Effect Does the Administrative Practice regarding Cryptocurrencies as Units of Account Have after the Introduction of Crypto Assets?

The federal government explicitly emphasized in the explanatory memorandum regarding crypto assets that it deems the qualification of cryptocurrencies as units of account as correct. The qualification of a blockchain unit as a unit of account may still be a decisive factor in certain cases, even after the introduction of crypto assets as financial instruments. This is, because of the explicit wording of the KWG that instruments cannot be qualified as crypto assets, if they qualify as e-money or if they are used as payment for services and goods exclusively within a limited business model of the issuer or as a voucher in a comparable way. Within the scope of these exemptions, blockchain units may still qualify as units of account, because BaFin qualifies e-money as well as payment units that are used as a means of payment for services and goods exclusively within limited business models as units of account. This administrative practice may be questionable, especially regarding the specifically regulated e-money units but it nevertheless is the binding administrative practice and therefore has to be observed by the market participants.


Attorney Lutz Auffenberg, LL.M. (London)




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