Birgit Rodolphe cites Germany’s crypto licence as an example of attractive regulation and writes that similar frameworks throughout the EU should be in place to “prevent fragmentation.”
Birgit Rodolphe (executive director of Germany’s Federal Financial Supervisory Authority, BaFin) has called for uniform and innovative regulation of decentralized finance (DeFi), across the European Union.
BaFin, Germany’s financial regulator, is responsible for regulating banks and insurance companies as well as financial institutions. This includes cryptocurrency companies. BaFin issues “crypto custody licences,” which are required permits for companies to offer cryptocurrency services in Germany.
Rodolphe , in an article posted on BaFin’s site, warned about the dangers to consumers from the unregulated DeFi area and called for uniform regulatory considerations across EU member states.
One thing is certain: the clock is ticking. Consumers are at greater risk if the DeFi market is not regulated. Critical offers with systemic relevance are also at greater risk.
She pointed out the risks of consumers being exposed to “technical issues and hacks” that have lost millions. She also claimed that DeFi protocols don’t allow for freedom to operate without regulations because they use new technologies.
“Utopia? Or perhaps dystopia? If I need to postpone my crypto loan, who do I contact? What happens if all my crypto assets disappear suddenly? There is no deposit protection fund in such cases.
She also stated that lending, borrowing, insurance, and other products not part of the traditional financial sector are subject to supervision and licensing where available. She called for regulators to establish rules to give DeFi providers legal clarity.
Rodolphe pointed out BaFin’s January 2020 “crypto custody company” license, which was introduced to crypto-businesses, as an attractive regulatory regime.
This license allows companies to offer crypto services within Germany. While only four providers have been approved at the moment, many financial institutions submitted an application. Rodolphe stated that regulatory frameworks should be identical in all European countries.
“Ideally, such requirements should be uniform across the EU to avoid fragmentation and maximize Europe’s innovation potential.”
Germany rose to the top of the most crypto-friendly countries in the quarter to 2022, partly due to its zero tax policy on long term crypto capital gains. According to a March 2022 report, almost half of Germans were interested in investing in cryptocurrency.
Germany also took many steps related to crypto in its government in 2021. These included law reforms to embrace Blockchain and tightening regulations for crypto businesses. The central bank of the country played a key role in testing the digital currency (CBDC) from the European Central Bank.
Rodolphe stated that the new DeFi regulations cannot be weaker than those for traditional financial products. This could make DeFi products more appealing to businesses from a regulatory standpoint.
