(For German version click here)
In 2018, the first first piece of codified regulation regarding blockchain and DLT units was introduced in the European Union with the creation of the so-called fifth Anti-Money-Laundering Directive. Since then, virtual currencies are defined by the European AML regulation as a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically. A month ago, the EU Commission published its draft version of a new EU Anti-Money-Laundering Regulation (EU AML Regulation), which is supposed to be applicable in the future in the member states without the requirement of a transposition into national law. The EU Commission seeks to standardize the anti-money-laundering prevention within the union in order to enhance the efficiency of the combat against money-laundering and terrorism financing. But the EU AML Regulation shall not set out the term of a virtual currency anymore.
Crypto Assets Instead of Virtual Currencies
The new EU AML Regulation will provide a definition for crypto assets instead of one for virtual currencies. The departure from the term of virtual currencies is consistent and logical, because firstly, the recommendations of the Financial Action Task Force (FATF) utilize the term crypto assets since 2019 and secondly, because there have been considerable problems with the definition of virtual currencies since Central and South American countries openly consider making Bitcoin their legal tender. By becoming a legal tender, Bitcoin would no longer be subject to the definition of virtual currencies. A definition of crypto assets is not provided in the draft version of the EU AML Regulation itself. The Commission in a rather eager attempt to create homogeneous regulation will define the term crypto asset in the Markets in Crypto Assets Regulation (MiCA), which is also in a draft state. This definition will be applicable to the EU AML Regulation as well. Consequently, crypto assets will be defined in the EU as digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology. The requirement of a lack of status of a legal tender will no longer be included into the definition, so Bitcoin will be qualified as a crypto asset regardless of the developments in Latin America.
The German Legislator Must React Anyways
The German Federal Government, on the basis of its blockchain strategy initiated in early 2020 a national solo-effort and instead of regulating virtual currencies in the Anti-Money-Laundering Act regulated crypto assets in the German Banking Act (KWG). In close resemblance to the definition of virtual currencies in the fifth Anti-Money-Laundering Directive, the German KWG defines crypto assets 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. There is no way for the German Legislator to keep this definition in effect, because MiCA as a European regulation will take precedence over German national law.
Attorney Lutz Auffenberg, LL.M. (London)
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