Is it legal to use bitcoins?
Is trading in cryptocurrencies like Bitcoin and Ethereum legal?
Trading in cryptocurrencies such as Bitcoin is not a criminal offense in Germany. BaFin has so far seen it differently. However, this view is now in contradiction with a current - criminal - decision of the Berlin Chamber of Commerce.
What does this mean for trading in cryptocurrencies?
Professional trading in Bitcoins is not punishable
Anyone who conducts banking business or provides financial services in Germany on a commercial basis requires a license from the financial services supervisory authority BaFin. A violation of the relevant regulations is punishable.
The chamber court did not see the professional trade in gross currencies as a criminal offense, since Bitcoin is neither a unit of account nor a financial instrument according to the German Banking Act (KWG). Therefore, it is not necessary to have a license to operate transactions and other banking business. (KG, judgment of September 25, 2018, Az. (4) 161 Ss 28/18 (35/18).
The defendant operated a platform on the Internet for trading bitcoins. Similar to an exchange, the platform brought buyers and sellers together. After the trading platform in a Zeitland went unnoticed, sales on the platform multiplied when Bitcoin began to soar in early 2013. The Polish authorities blocked the account shortly afterwards on suspicion of money laundering.
The German criminal authorities brought the case to a charge of violating the German Banking Act (KWG). Bitcoin trading required permission from BaFin, which the defendant was unable to produce. The district court therefore sentenced him to a fine. The Berlin Regional Court overturned this decision and acquitted the man. The Berlin Higher Regional Court has now confirmed the judgment of the regional court.
Trading in bitcoins on the platform was not subject to authorization, since the crypto currency is not a financial instrument within the meaning of the KWG and, in particular, is not a unit of account. A license from BaFin was therefore not necessary.
Bitcoins are neither financial instruments nor units of account. Bitcoin has no representable or comparable value of its own. Therefore, it is not a currency or means of payment in the classic sense, even if the Bitcoin is accepted as a means of payment among certain economic participants. Its value depends crucially on what value users attach to it. It is therefore subject to strong, unpredictable or calculable fluctuations.
Criticism of the BaFin
The Berlin court not only clarified the legal situation, but also expressed sharp criticism of the Federal Financial Supervisory Authority (BaFin). BaFin defines Bitcoin in one of its “specialist articles”, for example, as “legally binding” as a unit of account within the meaning of the German Banking Act. However, it is not the responsibility of the authority to intervene in criminal law. With this classification, BaFin left the area of responsibility assigned to it. The courts are also not allowed to close (alleged) loopholes in the law - and this applies in particular to criminal law - without authorization. This is what the legislature is called to do.
The judgment is not binding on BaFin
The judgment is one of the first legally binding criminal judgments on investments in the form of crypto currencies in Germany. The decision represents a clear defeat for the federal financial supervisory authority. It fundamentally calls into question the administrative practice of BaFin with regard to cryptocurrencies, since the approval requirements claimed by BaFin depend crucially on the classification of cryptocurrencies as financial instruments.
A correction of the BaFin practice is nevertheless not to be expected in the near future.
Firstly, the criminal law judgment does not have any direct binding effect on BaFin. So she is not prevented from staying true to her previous line. This would require an administrative decision. Second, BaFin is known for exhausting the legal process. A court had already questioned a BaFin information sheet on investment brokerage in 2014. However, the supervisory authority only corrected its administrative opinion after the ECJ had explicitly rejected the legal opinion of BaFin in 2017.
Judgment is not a "victory" for cryptocurrencies
Although the decision for investors in crypto currencies is initially positive, it also shows that there is an urgent need for legislative action. The regulation of cryptocurrencies would not only increase legal security but also increase their reputation among the public.
Crypto business models have a bad reputation
A good reputation is currently particularly important for the new types of crypto business models. Many have difficulties asserting themselves in the market against the background of the many gray to black sheep. They are sometimes even completely wrongly targeted by more or less serious journalists or other “warners” with their own dubious interests.
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