A German BaFin official Argues For An EU Wide DeFi Rule That Is Innovative

Germany undertook a number of crypto-related measures across the government, including legal amendments to embrace blockchain and tighter regulations on crypto firms.

BaFin is Germany’s financial regulator, in charge of overseeing banks, insurance companies, and other financial organizations, including cryptocurrency startups. BaFin is in charge of issuing crypto custody licenses, which are essential for companies wishing to provide bitcoin services in Germany.

Lending, borrowing, insurance, and other goods outside of the traditional financial system are all subject to license and supervision in the states where they’re sold, and she urged authorities to establish standards that will give DeFi providers legal certainty.

Birgit Rodolphe believes that such frameworks should be the same throughout the EU to avoid a fragmented market, citing Germany’s crypto license as an example of appealing legislation. Executive director of Germany’s Federal Financial Supervisory Authority (BaFin), Birgit Rodolphe, has urged for innovative and uniform regulation of the decentralized finance (DeFi) field.

An Attractive Regulatory Framework For Crypto Enterprises

BaFin is Germany’s financial regulator, in charge of overseeing banks, insurance companies, and other financial organizations, including cryptocurrency startups. BaFin is in charge of issuing crypto custody licenses, which are essential for companies wishing to provide bitcoin services in Germany. Rodolphe warned of the dangers of the uncontrolled DeFi area to consumers in an article on BaFin’s website, calling for comparable regulatory considerations throughout EU member countries:

One thing is certain: time is running out. The longer the DeFi market remains unregulated, the greater the risk to customers, and the greater the possibility that key offers with systemic significance may emerge. She listed technical difficulties, hackers, and fraudulent behavior as threats to consumers, claiming that DeFi isn’t as democratic and selfless as its supporters claim. DeFi devices are difficult for many to grasp. She came to the conclusion that DeFi protocols cannot function outside of rules just because they employ new technologies:

Utopia? Or is it dystopia? If I wish to postpone my crypto loan, who should I contact? What happens if all of my crypto holdings vanish overnight? In any event, there is no deposit insurance for such situations. She went on to say that lending, borrowing, insurance, and other goods outside of the traditional financial system are all subject to license and supervision in the states where they’re sold, and she urged authorities to establish standards that will give DeFi providers legal certainty.

Rodolphe cited BaFin’s crypto custody business license, which was launched in January 2020, as an attractive regulatory framework for crypto enterprises. The license allows businesses to provide cryptocurrency services in Germany. Only four suppliers have been licensed so far, but numerous financial institutions have applied. Rodolphe wrote that regulatory systems in different European countries should be the same:

Zero Tax Policy On Long Term Crypto Capital Gains

Ideally, such rules would be uniform across the EU to avoid market fragmentation and to maximize Europe’s total innovation potential. In the first quarter of 2022, Germany surpassed the United States as the most crypto-friendly country due to its zero-tax policy on long-term crypto capital gains. According to a research published in March 2022, nearly half of Germans are interested in investing in cryptocurrency.

In 2021, Germany undertook a number of crypto-related measures across the government, including legal amendments to embrace blockchain and tighter regulations on crypto firms. The central bank of the country was a pioneer in the development of a European central bank digital currency (CBDC). Rodolphe came to the conclusion that new DeFi laws must be weaker than the existing standards for traditional financial goods, as this might make DeFi products more appealing to businesses from a regulatory standpoint.

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Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing