REGULATIONS

Crypto Travel Rule
in

Germany

🇩🇪
Regulator
Travel Rule required from
Travel Rule regulation still pending
December 31, 2023

As a European Union member state, Germany closely implements the EU’s various Anti-Money Laundering directives (i.e., 4, 5 & 6 AMLD). Germany’s draft rules surrounding crypto asset transactions extend regulation (EU) 2015/847, also known as the Money Transfer Regulation.

Germany additionally follows stringent Risk-Based Approach (RBA) policies such as Enhanced Due Diligence (EDD) and Know Your Customer (KYC) requirements. Germany is a member of the FATF (Financial Action Task Force.)

Is cryptocurrency legal in Germany?

Yes. The German Federal Central Tax Office or Bundeszentralamt für Steuern (BZSt) treats bitcoin and other virtual currencies as private money for tax purposes. Crypto is not treated as foreign currency, legal tender, nor property under the German Tax Acts.

Are there any AML crypto regulations in Germany?

Yes. On May 11th, 2021, The German Federal Ministry of Finance published a working ordinance draft bill including increased “duties of care” in the transfer of virtual assets. Later, on June 14th, the German Federal Ministry of Finance released the updated hearing on the draft bill that requires crypto asset companies to enforce the Travel Rule.

Who regulates cryptocurrency in Germany?

Germany’s regulator for cryptocurrency is The Federal Financial Supervisory Authority, or BaFin (German: Bundesanstalt für Finanzdienstleistungsaufsicht). As the financial regulatory authority for Germany, BaFin presides over regulated activities for both traditional fiat banking and virtual assets. The German Banking Act (German: Kreditwesengesetz – KWG) amendments allow custody of virtual currencies.

Are there licensing or registration requirements for VASPs in Germany?

According to the German Banking Act's regulation amendments, VASPs in Germany that target legal entities or natural citizens must apply for a license with BaFin. Non-compliance with the German Banking Act constitutes a felony offense.

Travel Rule Requirements in Germany

Is the Crypto Travel Rule mandated in Germany?

Germany is one of the first European jurisdictions to mandate the Travel Rule, even before the European Union. On May 26th, 2021, the Federal Ministry of Finance (BMF) released a draft bill, Crypto Securities Transfer Regulation (German: KryptoTransferV), which mandated the Travel Rule. The Crypto Travel Rule will be mandated in Germany by the end of 2023, once the German Federal Ministry of Finance approves the ordinance. 

Crypto Securities Transfer Regulation (KryptoTransferV) § 5:

The Ordinance shall be evaluated by the end of 2023 by the Federal Ministry of Finance on the basis of a report by the competent supervisory authority pursuant to Section 50 No. 1 of the Money Laundering Act, unless a comparable regulation of the European Union has entered into force by then or a corresponding regulation of the European Union enters into force in the foreseeable future.

Does Germany permit a grace period to comply with the Crypto Travel Rule?

Yes. Section 4 of the Crypto Securities Transfer Regulation (KryptoTransferV) addresses the possibility of technical inadequacy and proposes a grace period to VASPs. In the absence of viable and standardized technical messaging protocols, the German regulator can grant VASPs grace periods of up to one year. VASPs need to take steps for risk mitigation during this period, such as restricting certain types of transfers. 

Crypto Securities Transfer Regulation (KryptoTransferV) § 4 paragraph 1:

“Section 4 (1) opens up the possibility of notifying the competent supervisory authority pursuant to Section 50 no. 1 AMLA that the transmission of information cannot yet be implemented or cannot be implemented in full due to a lack of technical capability for standardized transmission. The notification shall result in a suspension of the obligations under Section 3, provided that the competent supervisory authority under Section 50 no. 1 AMLA does not raise any objections under paragraph 2. Insofar as the technical implementation of the data transmission has already been taken into account in the structuring and issuance of crypto securities, a suspension of the obligations pursuant to Section 3 (2) shall not be considered.

Complying with the Crypto Travel Rule in Germany

What is the minimum threshold for the Crypto Travel Rule in Germany?

As a member of the FATF, Germany follows their Travel Rule guidance recommendations, setting the minimum threshold for sharing certain identifying information about the recipient and receiver for cryptocurrency transactions over USD/EUR 1000.

What personally identifiable information is required to be shared for the Crypto Travel Rule in Germany?

The Personally identifiable information VASPs are required to send and retain alongside transactions over EUR 1000 is in line with FATF and the most recent EU regulations.

Crypto Securities Transfer Regulation (KryptoTransferV) § 3 paragraph 1:

“The obligor performing the transfer on behalf of the principal shall ensure that the following information is determined and stored:
- Name of the client
- address of the client or the number of an official personal document of the client or the client number or the date and place of birth of the client
- Number of the originator’s account (for example, the public key)
- Name of the beneficiary and number of the beneficiary’s account (for example, the public key).”

Are there differences in customer PII requirements for cross-border transfers versus transfers within Germany?

According to the Crypto Securities Transfer Regulation (German: KryptoTransferV), Germany considers all virtual asset transfers as cross-border transfers. 

Crypto Securities Transfer Regulation (KryptoTransferV) § 3 paragraph 1:

Section 3(1) orders the corresponding application of the transfer of funds, with the proviso that crypto value transfers are considered as cross-border transfers to and from outside the Union due to their cross-border characteristics (see also FATF VA - Guidance update, paragraph 151). Thus, the simplifications for transfers within the Union do not apply.

What are the non-custodial or self-hosted wallet requirements in Germany?

While many regulators have signaled that they view transactions to non-custodial wallets as higher risk, Germany takes a stricter stance on crypto custody than what FATF details in their latest guide. Germany views transfers to self-managed electronic wallets as the starting point of a suspicious transaction.

Crypto Securities Transfer Regulation (KryptoTransferV) Section A Part 1:

“In addition, the transfer of cryptovalues ​​to an electronic wallet that is not managed by a crypto custodian (self-managed electronic money exchange), or vice versa, is viewed as a case constellation with increased risk. So can the Forwarding of crypto values ​​to a self-managed electronic wallet represent a starting point for a suspicious transaction.”

Why choose Notabene for Crypto Travel Rule Compliance in Germany?

German crypto companies can utilize Notabene to roll out their crypto compliance strategy gradually. Notabene is the only end-to-end Travel Rule compliance solution that securely permits VASPs to send required PII before sending crypto transactions. Notabene helps German financial institutions and VASPs comply with the FATF’s Recommendation 16 “Crypto Travel Rule” as required by BaFin.

Last updated
August 22, 2021

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