Since last autumn and the announced massive resistance of international politics against Facebook´s Libra coin it has been relatively quite regarding the idea of stable coins that are issued by private companies. Nevertheless, the advance of the social media giant has been a true wake-up call for legislators and central banks of the major economies around the globe. According to information from the Chinese government, China is close to the implementation of a digital Yuan. The United States FED plans the introduction of a Crypto-dollar and the European Central Bank (EZB) discusses the possibility of a blockchain based form of the euro. Digital central bank money (CBDC) has a high chance of becoming reality in the near future, even though the exact design and scope of it cannot be asserted at this moment. The question that arises from this possibility is how CBDCs would have to be classified from a regulatory point of view and how their existence would affect the existing crypto market.


If individual central banks actually decide to issue blockchain based currencies, these units would most likely have to be qualified as national currency and therefore as legal tender. As a consequence, units of a hypothetical crypto-euro would be subject to the German Payment Services Act (ZAG). Service providers that e.g. offer their customers transactions of crypto-euros or crypto-euro wallets would then engage in payment services that are subject to prior BaFin authorization under the Payment Services Act. It is also worth noticing, that e.g. the exchange of crypto-euros to crypto-dollars would in all likelihood be considered foreign exchange trade and therefore be subject to the German Banking Act (KWG), because foreign exchange, according to the KWG, is a financial instrument. This will, in some cases, result in an additional mandatory licensing obligation in accordance to the KWG for providers of certain services. It is however certain that CBCDs could not be qualified as crypto assets. The newly added (1st of January 2020) definition of crypto assets to the KWG explicitly requires that crypto assets are digital values that are not issued by a central bank or any other public institution. Therefore, the custody of CBCDs cannot be a crypto custody service as defined by the German regulatory banking law.


Up to now the regulatory classification of cryptocurrencies was a legally controversial and highly interesting task. While in many nations Bitcoin, Litecoin and comparable decentralized digital currencies are neither classified as legal tender nor as financial instruments, in e.g. Germany they are classified as financial instruments in the form of either units of account or as crypto assets according to the KWG. Crypto payment tokens that are issued by a central emitter qualify as e-money provided that all other requirements are fulfilled and security tokens are potentially subject to the capital markets regulations. Blockchain based means of payment that are issued by a central bank could play an interesting role in the crypto eco system in the future. First and foremost they would render obsolete the need for most private stable coins because they would present a crypto compatible retreat asset without immense volatility which is the exact role that private stable coins play right now. At the same time, they would bring the established financial system closer to “traditional” cryptocurrencies. This could pose problems especially with regards to AML risks. Another crucial point would be the fact that the governments would have access to all economic data of the users of the CBDCs that it issued.

Attorney Lutz Auffenberg, LL.M. (London)




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