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A brand new step in crypto legislation is coming to fruition in Germany’s federal parliament, the Bundestag. The parliament drafted a bill that allows banks to become merchants and custodians of the world’s cryptocurrency in 2020, should it be passed. The news was reported on Wednesday through the German newspaper service focused on business, Handelsblatt. Should this bill be passed, it would be theoretically possible for cryptocurrencies to gain full cash liquidity inside the fourth largest economy of the world.
Ousting Anti-crypto Banking Laws
The newly formed bill proposes the removal of a clause in the European Union’s Fourth Anti-Money Laundering Directive. Specifically, the one that forbids banks from dealing with cryptocurrencies directly. Through the directive, the EU’s banks were forced to do business in crypto via subsidiaries and third-party custodians as per the “separation bid.”
The bill is expected to be adopted. When it does, the banks of Germany will be legally capable of storing cryptocurrencies and securities like they already do with bonds and stocks. With this new legal authorization, they can offer services to citizens of Germany as if crypto was cash.
Two Sides of the Coin
The BdB, or the Association of German Banks, have only given praises to the bill that’s been proposed. The BdB explained that the banks were experienced in the practices of “safekeeping of client assets and in risk management” as well as being “committed to investor protection.”
Baden-Württemberg, Germany’s third-largest state, has its watchdog of consumer protection in a more skeptical state for the bill. The firm has shown its concerns that the banking industry of Germany would aggressively market cryptocurrencies to those uneducated in them. This would ultimately lead to them losing their money for it.
The group stated that banks only sell a variety of financial products should the commission make it desirable. If the banks sell the cryptocurrencies and keep them in wallets for a set fee, there is a risk that the clients would suffer a total loss of funding without being aware of what they got into.
The Herald of the Cryptobanking Age
Many in the crypto industry fear the legislation due to the potential of it heralding the start of other nations doing the same. This would result in a “power grab” within the crypto industry. In this move, the financial institutions of the world will start to dominate the crypto industry, much like they do in conventional currency markets.
Many believe that it will “corrupt” the crypto industry, distorting it into something the founder of crypto, Satoshi Nakamoto, never intended it to be. The prediction of this eventuality was made by Hal Finney, one of the world’s first crypto pioneers. Ten years ago, he theorized that the domination of banks would be the “ultimate fate” of Bitcoin.
The immediate effects of this eventuality are stricter, bank-like regulations in the crypto industry. Excluding the German bill, many key markets across the world are making similar moves, although not as significant. The UK’s Financial Conduct Authority announced in October this year that all ATMs, open-source wallets, and crypto businesses will have to comply with KYC policies regarding their users.