The German crypto and stablecoin industry is facing a critical situation: the Financial Market Digitalization Act (FinMaDiG) risks not being implemented into German law in time. The current government crisis in Germany threatens to delay the passage of this essential legislation, with far-reaching consequences for Germany as a financial hub. Over the past few years, Germany has worked hard to establish itself as an international leader in cryptocurrencies and stablecoins. However, this status could soon become a thing of the past.
The urgency of this situation cannot be overstated:
1. Regulatory Gap:
Without FinMaDiG, Germany lacks the legal foundation to implement the European "Markets in Crypto-Assets" (MiCA) regulation. MiCA, a comprehensive European crypto regulation set to take effect primarily on January 1, 2025, governs services surrounding cryptocurrencies and all types of stablecoins, addressing a multi-billion-euro market.
2. Competitive Disadvantage:
German companies risk falling behind their European counterparts without the swift passage of FinMaDiG. Supervisory authorities in other European countries, such as France and Luxembourg, have already started issuing licenses, giving their financial sectors a head start. In contrast, the German Federal Financial Supervisory Authority (BaFin) is still unable to process license applications, creating a significant disadvantage for Germany as a financial hub.
Since July 2024, German companies could have issued stablecoins under a clear legal framework. However, due to the lack of legislation, licenses in Germany cannot yet be applied for, forcing companies to either delay their operations or relocate to other European countries.
As the new year approaches, the situation is set to become even more precarious. Not only will the stablecoin-related aspects of MiCA remain unenforceable in Germany, but other critical components of the regulation, including enhanced consumer protection and anti-money laundering measures, will also not be transposed into German law.
3. Risk of Corporate Relocation:
The absence of legal certainty could lead to an exodus of crypto companies, skilled professionals, and innovation to other European countries that have successfully integrated the MiCA regulation into their national laws. Catching up would take years, putting Germany at a lasting disadvantage.
It is clear: failing to pass FinMaDiG this year would severely jeopardize the competitiveness of German crypto and stablecoin companies—a setback that could take Germany years to recover from. Legislators must act now to safeguard Germany’s position as a leader in the crypto and stablecoin industries. Passing FinMaDiG in 2024 is essential for the country's economic future.
Regulated stablecoins can play a pivotal role in Germany’s industrial development. For example, digital money in industrial payments, such as machine-to-machine transactions, could lead to significant efficiency gains and resource savings. As the European Central Bank (ECB) continues to explore digital money without fully considering its industrial applications, regulated stablecoins could fill this gap.
The time to act is now. FinMaDiG must be passed without delay to secure Germany’s future as a global financial leader.
The DEA will actively address this issue and engage with regulators and politicians to emphasize the urgency of passing FinMaDiG.