Raphael Thys
Germany is embracing Bitcoin. Image: Shutterstock.
As Germany is bracing for what many expect to be a new dawn for Europe’s largest economy, the incoming government has presented a coalition agreement which—for the first time ever—mentions cryptocurrencies and blockchain technology among the pillars that will support the country’s development in the next four years.
The so-called “traffic light” coalition government consists of the center-left Social Democrats (SPD), the Green Party, and the business-friendly Free Democrats (FDP).
In its roadmap, the three-way coalition, which describes itself as an “Alliance for Freedom, Justice and Sustainability,” has stated that it plans to modernize and revitalize the country.
Some policies in the deal include phasing out the use of coal by 2030 and committing to 80% renewable energy, increasing the minimum wage to €12 (~$13.58), as well as legalizing the regulated sale of cannabis.
The most important tenant, at least for crypto enthusiasts, however, is that of the country’s ambitions to digitalize.
Germany’s focus on tokenized stocks, funds
The new government pledged to create a digital state and develop new strategies for cryptocurrencies and blockchain technology.
“We need a new dynamic in relation to the opportunities and risks from new financial innovations, crypto assets and business models,” the 177-page document reads. “We advocate a level playing field with equal competitive conditions within the [European Union], between traditional and innovative business models and towards large digital companies.”
One notable paragraph in the agreement, as pointed out by Frank Schäffler of the FDP, includes the provision to allow the issuance of tokenized stocks.
Die Möglichkeit zur Emission elektronischer Wertpapiere wird auf Aktien erweitert. #Blockchain #Koalitionsvertrag
— Frank Schäffler (@f_schaeffler) November 24, 2021
“Digital financial services should work seamlessly, therefore, we will create the legal framework and the possibility to expand the issuance of electronic securities to include stocks,” reads the document.
Earlier this year, Germany adopted new legislation that enabled managers of institutional investment funds—also known in German as Spezialfonds—to allocate up to 20% of their funds to cryptocurrencies.
"The coalition agreement is clear: after allowing tokenized funds the next step are tokenized stocks. This is exciting and will accelerate blockchain adoption tremendously," Sven Hildebrandt, CEO of Hamburg-based Distributed Ledger Consulting (DLC) told Decrypt.
The new coalition government also agreed that Germany should become one of the leading locations in Europe for FinTech and InsurTech platforms, as well as for the so-called neo-brokers—consumer-focused finance applications for trading stocks and other investment options.
Additionally, the incoming government said that it intends to “constructively support the process of introducing a digital euro as a supplement to cash, which is accessible to everyone as legal tender in Europe and can be used in general.”
Keeping an eye on EU-wide regulation
Any new approach to the digital assets space in Germany is likely to be aligned with the general policies of the European Union.
On Wednesday, the European Council adopted two proposals for regulating cryptocurrencies: the Regulation on Markets in Crypto Assets (MiCA) and the Digital Operational Resilience Act (DORA).
"The purpose of MiCA is to create a regulatory framework for the crypto-assets market that supports innovation and draws on the potential of crypto-assets in a way that preserves financial stability and protects investors,” the European Council said.
The new rules are yet to be ratified, but they are likely to become the standard regulatory framework with the EU, something that Germany—one way or another—will have to comply with.
Germany’s new coalition is paying special attention to any and all regulations too, particularly when it comes to preventing money laundering and terrorist financing.
“We need joint European supervision for the crypto sector,” reads the document. “We oblige crypto asset service providers to consistently identify the beneficial owners.”
The new coalition government has stated that it supports the idea of an independent EU regulatory authority that would specifically focus on combating money laundering and terrorism financing—both in the traditional finance and crypto, ensuring there’s no anonymity to users.
Such an authority, according to the agreement, should be headquartered in Frankfurt am Main, one of the world’s largest financial hubs and the home to the European Central Bank.
Though some experts see the coalition’s proposals as forward-thinking, others are already voicing criticism.
“Of course, they [the new government] want to see a competitive business climate both in Germany and in the EU, but this will be a very regulated and non-disruptive competition which, from their perspective, should not endanger the already existing structures,” Oskar Giese, organizer of the Unchain Convention, told Decrypt.
To Giese, the coalition’s agreement in its current form demonstrates a highly central planning mentality of the new German government, whilst, from his point of view, it will most likely be utilized to fight any innovation in the crypto space that can possibly undermine existing monopolies as well as rising authoritarianism in the EU.