The German Financial Market Authority BaFin praised the revolutionary potential of blockchain technology in the first issue of its new “Perspectives” publication series published in July. On more than 30 pages, BaFin has numerous experts from the private sector explain technical aspects of distributed ledger technology. In a separate chapter on the subject of cryptocurrency regulation, BaFin makes its own contribution.
BaFin sees the blockchain technology’s confidence-building effect on the economy as positive
The intermediaries previously required in many transactions, such as banks and central securities depositories, could be partially replaced by blockchain technology applications, resulting in lower transaction costs and more efficient markets.
Blockchain technology can help to minimize the necessary trust and thus transaction costs between the parties involved in the transaction, for example by reducing dependence on intermediaries.
Blockchain technology could, therefore, create a new type of decentralized ecosystem, which BaFin calls the “blockchain economy,” which will primarily affect the financial services industry. Their subscriber-supported infrastructure cannot only significantly change business processes but also massively shift the strategy of the companies working with them.
The German Financial Market Authority BaFin also debated cryptocurrency regulations
According to BaFin, it is “always guided by the principle of technological neutrality” and follows the credo “same business, same risk, same regulation,” which means that it is based on the “principles of proportionality and equal treatment under the rule of law.”
BaFin also rejects the view that cryptocurrencies are not regulated.
Cryptocurrencies are not unregulated per se, but are subject to the existing financial market regulations, depending on their concrete form in individual cases. They are therefore not regulated across the board, but specifically and technology-neutrally according to material facts that are subject to legal interpretation and can therefore also cover new types of facts.
In the document, BaFin also describes in detail the principles it uses to evaluate crypto tokens and initial coin offerings (ICOs), which are based on the delimitation of payment tokens or virtual currencies of utility tokens and securities tokens.