Next year Germany is very likely to accept a law that will make it possible for institutional banks to offer crypto services, including bitcoin custodial wallets. Handelsblatt reported the news earlier this week. This would make Germany the first major European country to embrace cryptocurrencies at an institutional level, and likely more countries will follow. Because the Germans have been the leading force behind the European economy for decades.
What’s happening now in Germany?
The law is already approved by the Bundestag, and is now awaiting approval from the sixteen states of the Bundesrat. The law would implement the 5th Money Laundering Directive of the European Union. Members of the EU have until January 10th 2020 to implement the directive.
Once the law has been approved, it would allow banks in Germany to sell bitcoin and other crypto. And older version of the bill would require banks to work with special subsidiaries or external custodians for crypto assets. Under the new law this is no longer the case.
At this moment there’s only one company offering both traditional banking services and cryptocurrency wallets, and that’s fintech startup Bitwala. They have integrated banking and crypto trading, and offer services to citizens of the European Union.
Germany leaders in Europe
Germany has the biggest economy in the eurozone. They are responsible for over 25 percent of the continents export. With 83 million citizens they are also the biggest country in Europe, while many countries consider them their biggest trade partner. But the German economy isn’t doing so great, as the economy shrank 0.1 percent in the second quarter. At the same time there’s the trade war with the United States, which hurts export in many ways. In addition car sales around the world are dropping, and major German companies like Siemens, Daimler, and ThyssenKrupp are under-performing. All these events influence the rest of Europe.
When Germany would start embracing cryptocurrencies on a banking level, it could pave the way for other countries to do the same. Banks want control over the money flow, and they can get that by joining the party. European banks are already struggling with public opinion, as interest on savings has already become negative at some banks. Many European banks only offer 0.01 percent interest, causing doubt among their clients.
European Central Bank has a crucial role
Amidst all talks about banks and cryptocurrencies, there’s an important role for the European Central Bank. Not only should the ECB formulate plans for a digital euro, but also should it create a framework for national banks to follow. Accepting services involving cryptocurrencies would make sense, especially considering
Germany already wants a digital euro. The German bank association (Bankenverband) believes that ‘the economy needs a programmable digital euro’. The digital system should fit within a state-determined system, where the state has the responsibility for the monetary system. The new law would have banks in Germany dip their toes into the crypto space, and perhaps have them discover it’s not such a scary place after all.
On top of that some people within the European Central Bank are already in favor of both a digital euro and cryptocurrencies. Benoît Cœuré emphasized earlier this week that initiatives from central banks in the cryptocurrency space shouldn’t undermine other payment solutions. Bitcoin payments and other cryptocurrencies should be allowed as well, alongside a digital euro.
Bitcoin payments penetrating the market
All over Europe there are initiatives that show that bitcoin payments can coexist together with traditional money. For example, Bitpanda is now offering a crypto payment service for utility bills. Much more prominent is an example from France, where major retailers like Foot Locker, Decathlon and Conforama will start accepting bitcoin in 2020.
The trend doesn’t stop in France. Also major American brands are moving into crypto. Starbucks and Bakkt are working on a consumer-focused bitcoin payment app, allowing people to buy coffee using the number one cryptocurrency. The app is scheduled for a release in 2020. At the same time fintech startups have launch debit cards, that can be topped up with cryptocurrencies. Wirex is one of the leading examples.
German banks offering cryptocurrency services will mean a lot for Germans. It allows mainstream users to get in touch with cryptocurrencies easier than ever before. On top of that the German law can serve as a blueprint for other European countries, which are all following the anti-money laundering directives from the European Union anyway. However, not everybody is happy. Some fear that banks will get greedy, and as a result they might not educate clients well enough.
Also published on Medium.