German Regulators have no Framework for Reporting Cryptoasset Financial Crimes

The German financial regulator, The Federal Financial Supervisory Authority (BaFIN), has claimed that although they are aware of the potential for criminality arising from cryptocurrency usage and transfer via darknet markets; they have no specific information pertaining to cyber incidents on trading platforms for cryptoassets in Germany.

Communicating via press release on May 28th, the Deutscher Bundestag, the German parliamentary news outlet, reported that as far as their information shows, there have been no instances of cyber incidents, including market manipulation, on German cryptocurrency exchanges.

The press release comes amid a ‘small request’ from the FDP Group, a liberal leaning and internationalist party led by Christian Lindner, who requested information on cryptocurrencies potential to facilitate money laundering, market manipulation and fraud.

The report added that the FDP Group were still ‘uncertain’ about the status of cryptocurrency, specifically Bitcoin, in Germany, as whilst the Berlin Court of Appeal ruled in 2013 that Bitcoin is neither a unit of account nor a financial instrument under the Banking Act, BaFIN have classified them as such regardless.

This confusion, it seems, has led to the misreporting of cryptoasset related crimes, and therefore has contributed in part to the potential incompleteness of BaFIN’s information on the matter; with such crypto-based crimes instead being reported as standard financial crimes in police crime statistics. 

Within the report, originally published in German, BaFIN says:

“The Federal Financial Supervisory Authority has, beyond publicly known incidents, no information on fraud in the area cryptocurrencies and initial coin offerings in Germany or the European Union”

The report went on to say that Federal law enforcement is aware of issues of money laundering through Bitcoin revenues derived from narcotics dealings on the darknet, which have been subsequently laundered through German bank accounts, which have been treating using existing laws.

The report finishes by stating that:

“As part of the implementation of amending Directive (EU) 2018/843 on the Fourth EU Money Laundering Directive, the Federal Government will promptly make any adjustment needed, in connection with the regulatory classification of any address of cryptocurrencies and cryptoassets in the Banking Act. The Amending Directive is to be transposed into national law by 10 January 2020.”

Therefore, it seems that the German Federal Government, in association with BaFIN and other regulatory authorities, will be working together to streamline and standardize cryptoasset regulation under a single regulatory umbrella by 2020. This move should facilitate clearer reporting on the exact nature of crypto-based financial crimes within the nation.