- The planned fourth EU Money Laundering Directive stipulates that banks may hold and sell Bitcoin from 2020.
- This would open up a new business segment for banks and represent new competition for already established cryptocurrency exchanges.
So far, the European Union has shown a negative attitude towards cryptocurrencies and associated digital assets such as Bitcoin, Ether or XRP with money laundering and terrorist financing. However, this view seems to be turning slowly but surely. A revision of the Fourth Money Laundering Directive provides a great relief for banks.
Banks may keep Bitcoin safe and offer it to their customers
The EU has launched a new bill on the fourth Money Laundering Directive, which is scheduled to enter into force in 2020. Until now, banking institutions were prohibited from offering virtual assets or storing them for their customers. The German Bundestag has taken this EU law as an opportunity and recently passed its own bill to implement it, which provides for corresponding simplifications. However, further approval is required before the law can enter into force.
In the new draft law, the requirement for separation, which still existed in the first version, was deleted. The separation requirement stated that the retention of Bitcoin and other digital assets must not originate from the same legal entity as other banking transactions. Accordingly, banks would have had to resort to external service providers who offer an appropriate custody service.
From next year, however, banks in Germany will be able to offer their customers cryptocurrencies in addition to traditional financial instruments such as shares or securities in online banking. Industry experts welcome this decision and attribute Germany a pioneering role in the regulation of cryptocurrencies. Sven Hildebrandt, head of the consulting firm DLC, states:
Germany is well on its way to crypto heaven. The German legislator is playing a pioneering role in the regulation of crypto custodians.
The German Bankers Association (BdB) describes banks as having a wealth of experience in keeping client assets secure and with strong security and risk management. In addition, banks have always been monitored by the Financial Supervisory Authority and are under constant observation.
Critics fear that banks could aggressively advertise cryptocurrencies. Financial expert Niels Nauhauser explains:
Basically, banks sell a wide variety of financial products if the commission is right. If they are allowed to sell cryptocurrencies and store them for a fee, there is a risk that they will sell their customers assets with a total risk of loss without them knowing what they are getting into.
Economist Fabio de Masi continues to warn that the banks have already waited for this moment to enter this lucrative business. However, sufficient information on the subject of cryptocurrencies and an explanation of the resulting risks must not be lacking:
The banks are hot on profits from crypto transactions. But financial consumer protection must not be undermined.
Bitcoin on its way into the mainstream?
This step would promote the spread and acceptance of cryptocurrencies, although it would not increase their use in people’s everyday lives. Bitcoin could be made available to a larger customer base as a speculative instrument, thus competing with shares and securities.
Since 2013, Bitcoin has recorded a higher return than one of the most important stock indices in the world, the S&P500. Despite a strong performance, it remains to be seen what actual impact these developments will have on Bitcoin’s price and the development of the market. At the time of writing, Bitcoin recorded a price increase of 8.20% to USD 7,553.30 within the last 24 hours.
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