New German government cites crypto in coalition agreement

Crypto was included in the new German government’s coalition agreement, which advocates for a level playing field between traditional banking and “creative business models.”

This week, three German political parties reached an agreement on a coalition that would see the left-leaning Social Democrats (SDP), the Green Party, and the right-leaning Free Democrats (FDP) assume power in December.

The alliance asks for a new “dynamic in regard to the benefits and hazards from new financial innovations” such as crypto assets and blockchain enterprises, according to a rough translation of the 177-page agreement issued on Nov 24:

“In order to provide holistic and risk-adequate oversight of new business models, we are adapting European financial market supervisory regulation to accommodate digitalization and complicated group structures.”

“For the crypto industry, we need united European monitoring.” The agreement further states that “we require crypto asset service providers to consistently identify the beneficial owners.”

The EU regulatory authority should “not only look after the traditional financial sector but also prevent the exploitation of cryptocurrencies for money laundering and terrorist funding,” according to the paper.

Following the German federal election on Sept. 26, the establishment of the coalition allegedly took two months of discussions. It also signals the end of Angela Merkel’s 16-year reign as Chancellor, who will be succeeded by the SDP’s Olaf Scholz.

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Crypto progressing across the EU

On the other hand, the European Council, which determines the EU’s political agenda, approved two proposals: the “Regulation on Markets in Crypto Assets (MiCA) framework” and the “Digital Operational Resilience Act” (DORA).

MICA, in particular, proposes to create a “regulatory framework for the crypto-assets market that fosters innovation and draws on the potential of crypto-assets,” as prepared by the European Commission in September 2020. While the European Parliament must yet ratify it, if it is passed, it would subject crypto-asset issuers to more strict standards, but nonfungible tokens (NFTs) and utility tokens will be exempt from the rule.

The progressive regulation plan was dubbed the “most essential one to date for the whole crypto business” in a lengthy post on the r/CryptoCurrency subReddit by user “BelgianPolitics” on Nov. 26.

At the time of writing, the Redditor’s study had almost 900 comments and provided a full summary of the proposed laws in MICA. The importance of the proposals was stressed by the author:

“Every entity operating in the European Union will be required to respect these regulations.” However, due to the ‘Brussels Effect,’ there is a significant probability that these norms will eventually become worldwide standards. While everyone’s attention is focused on the United States and China, the EU is quietly leading the way,” according to Belgian politics.