The German federal government recently examined whether bitcoin and other cryptocurrencies pose a threat to the financial stability of the country, and announced June 12 that it has found no such risks.
The response came in reaction to questions posed by right-wing political party Alternative for Germany (AFD) on issues relating to cryptocurrencies. The AFD has become the third-largest political party in Germany’s Parliament, with 94 out of 709 seats.
According to the report, the conclusion was reached, “due to the small market capitalization of Bitcoin and other crypto tokens and the limited interlinkages with the financial sector.”
However, the German government does recognize the potential of cryptocurrencies to be used in money laundering and terrorist financing. It also states that it cannot reliably estimate the scope of these illicit activities.
In response to questions about potential future regulations and laws to mitigate risks associated with cryptocurrencies, the report lists actions already taken, including the legal requirements for cryptocurrency trading platforms to obtain a license from the BaFin Financial Supervisory Authority, and highlights a number of cases in which pre-existing laws have been used to police cryptocurrency-related crimes. It also points out that BaFin has already issued warnings about initial coin offerings but, due to the “global tradability” of these offers, a coordinated effort between national governments would be required to be more effective.
A recent report asserts that the digital assets are not a threat to the country’s financial stability but that international efforts should be made to curtail money laundering and terrorist financing.
The response doesn’t make suggestions for specific global measures, but German officials have pushed for G20 discussion of cryptocurrencies in the past.
Germany is currently the economic powerhouse of Europe with significant influence across the European Union, due to having the highest GDP of the EU (followed by the United Kingdom, and France respectively). Its stance could well be followed by smaller EU member states.
Though Germany is relatively tolerant of cryptocurrencies, attitudes are mixed across government and financial institutions. This recent report echoes German president Frank-Walter Steinmeier’s February comments likening cryptocurrencies to “betting games.”
A few weeks prior to President Steinmeier’s assertation, board member of Germany’s central bank Joachim Wuermeling said, “Given that cryptocurrencies are a global phenomenon, unilateral action by just one country or regulator would be ineffective.”