How much virtual currency do you own

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In its opinion, the European Banking Authority (EBA) defines VC as a digital representation of value that is not created by a central bank or public authority and does not have to be linked to legal tender. VC are used by natural and legal persons as a medium of exchange and can be electronically transferred, stored or traded.


All VC are based on the idea of ​​a non-governmental substitute currency with a limited amount of money. In contrast to the money that the central banks can spend indefinitely and the book money that the commercial banks create, new units of value are created using a predetermined mathematical process within a computer network. This process is known as "mining".

Anyone interested can download programs by means of which they can participate in the network and create VC, provided that their computer has the necessary performance. The network functions as a “peer-to-peer”, in which all users are fundamentally equal. There is no central authority that controls or manages transactions or credits.

VC are assigned to identifiable locations ("addresses") in the network. These usually consist of randomly generated sequences of digits or numbers. The VC is managed by the respective owner with his private and public key pairs for the authentication of transactions. All users can transmit their VC to each other within the network; they have to communicate the respective target addresses regularly outside the network.

The VC at the respective points and all previous transactions are publicly visible in a central file, the blockchain. However, based on the positions in the network, it is not possible to identify who is actually the owner of the VC. Transactions once made are fundamentally irreversible. In addition to the transmission of VC within the network, it is also possible to physically transfer digits and keys between people, for example by passing them on on data carriers.

Inquiries to BaFin

With the introduction of the offense of crypto custody business in Section 1 Paragraph 1a Clause 2 No. 6 of the Banking Act (KWG), the safekeeping, administration and securing of crypto values ​​or private cryptographic keys that serve to hold, store or transfer crypto values for others, as a financial service has been anchored in the KWG.

Bitcoin and other cryptocurrencies represent financial instruments as crypto values ​​according to Section 1 Paragraph 11 Clause 1 No. 10 KWG because they are digital representations of a value that was not issued or guaranteed by any central bank or public body and that does not have the legal status of a currency or has money, but is accepted as a means of exchange or payment by natural or legal persons on the basis of an agreement or actual practice or serves investment purposes and which can be transmitted, stored and traded electronically (section 1 (11) sentence 4 KWG).

In addition, BaFinBitcoins classifies, in accordance with its longstanding administrative practice, as units of account within the meaning of Section 1 (11) sentence 1 no. 7 KWG and thus as financial instruments. Units of account are comparable to foreign exchange, but are not denominated in legal tender. This also includes units of value that have the function of private means of payment in ring exchange transactions, as well as any other substitute currency that is used as a means of payment in multilateral clearing groups on the basis of agreements under private law.

This legal classification applies in principle to all VC. The underlying software or encryption technology is not important here.

VC, on the other hand, are not legal tender and therefore neither currencies nor sorts. They are also not e-money within the meaning of the Payment Services Supervision Act (ZAG), as there is no issuer who issues them on the basis of a claim against themselves.

This is different with digital means of payment, behind which there is a central point that issues and manages the units. Such companies usually operate the e-money business in accordance with Section 1 (2) ZAG (e-money).

Permission requirement

The mere use of VC as a substitute for cash or book money to participate in the economic cycle in the exchange business is not an activity requiring a permit. The service provider or supplier can have their services paid for with VC without having to provide banking or financial services. The same goes for the customer. Likewise, the mining of VC does not in itself constitute a business requiring a permit, as the "miner" does not issue or place the VC himself. The sale of self-mined or acquired VCs or their purchase do not generally require a permit.

However, if other circumstances arise, the commercial handling of VC can trigger the authorization requirement under the KWG (information sheet on general permits). If the required permit is missing, this is usually a criminal offense under Section 54 of the KWG. Typical business constellations are briefly presented below.

License requirements for platforms and exchanges

Commercial trading in VC is mostly done via platforms, which are often referred to as exchanges. Many different business models are summarized under this term. When it comes to the question of the licensing requirement, a distinction must be made according to the technical implementation and the respective design of the business.

Anyone who commercially buys and sells VC for third-party account in their own name operates the finance commission business that is subject to authorization. The acquisition or sale of the VC takes place for the account of a third party if the client is affected by the economic advantages and disadvantages of this transaction. Furthermore, the activity must be sufficiently similar to the commission business according to the Commercial Code, whereby individual rights and obligations may differ from the typical commission business. In the case of VC platforms, the financial commission business requiring authorization is therefore fulfilled if:

  • the individual participants are authorized to issue instructions to the platforms until the order is executed by specifying the number and price of transactions,
  • the respective participants do not know their trading partners and the platform does not act as a representative of the participants but in its own name,
  • the economic advantages and disadvantages of the transactions affect the participants who transfer money to platform accounts or transfer VC to their addresses, and
  • the platform is obliged to give the participants an account of the execution of the transactions and to transfer purchased VC.

If there is no financial commission business with platforms, it may be the operation of a multilateral trading system. This brings together the interests of a large number of people in the purchase and sale of financial instruments within the system according to specified provisions in a way that leads to a contract for these financial instruments. This means that there is a set of rules on membership, VC trading between members and reports on transactions concluded. A trading platform in the technical sense is not required. Multilateral means that the operator only brings together the parties to a potential deal via VC. Expressions of interest, orders and quotes also count as interest in buying and selling. Above all, a large number of people means that there is no need for an order to mediate in individual cases. According to the rules and regulations, the interests must be brought together using software or protocols to conclude a contract, without the parties being able to decide in individual cases whether they want to enter into a VC deal with a specific contractual partner. It is irrelevant whether the contract is then processed within the system.

Multilateral trading systems are therefore particularly obvious in the case of platforms on which providers set VC and set a price threshold from which a trade should be processed, or on which providers secure transactions by depositing them by transferring them to the VC platform and only approving them when the provider confirms the payment.

Platforms that offer regionally structured registers for a fee of people or companies that offer VC for sale or purchase are usually investment and contract brokerage.

Permission requirements for mining, buying and selling

Providers who, as "exchange offices", exchange legal currencies into VC or VC into legal currencies, are deemed to be proprietary trading. This occurs when VCs are not only mined, bought or sold in order to participate in an existing market, but a special contribution is made to create or maintain this market. Due to the additional service element, it is then proprietary trading that requires a permit. This is the case, for example, when a person publicly advertises that they regularly buy or sell VC.

Although the mining of VC is not in itself a business that requires a license, mining pools do offer commercial shares of the revenue from mined and sold VC e.g. B. against the provision of computing power by the user, they are i. d. Usually active subject to authorization.

Practical advice

In practice, the specific functionality of VC companies was often not or not clearly described. There were also often no general terms and conditions. The licensing requirement is a legally complex issue overall, particularly because of the technical features. Potential providers should therefore obtain an assessment of their planned business activity at an early stage in order to clarify whether this is subject to supervision.

Providers who increase the already existing risks for the users of VC are subject to financial supervision by law - as are traders of other financial instruments such as stocks, derivatives and foreign exchange. The supervision should ensure that the financial and organizational standards in business dealings with customers and financial instruments are complied with, unreliable providers stay away from the market and - in the interests of customers and the German financial center - the necessary precautions are taken to prevent money laundering. Banks or financial service providers that already have a license in accordance with Section 32 KWG are therefore also allowed to conduct the transactions they are permitted to do with shares, for example, with VC.

Further information

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