the Federal Financial Supervisory Authority (BaFin)
Travel Rule required from
Travel Rule regulation still pending
October 1, 2021
Content last updated
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.
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.
2. 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.
3. 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.
4. 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.
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.
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.
2. 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.
If German VASPs cannot comply by the enforcement date of October 1st, 2021, they must notify the relevant authorities and provide an explanation by November 30th, 2021 and provide reasons by December 31st, 2021. This time period may be, at most, 12 months.
The explanation must include the following:
Information on why the institution cannot follow the rules.
Any measures taken to address this issue.
The expected time required to resolve the impediment.
Subject to approval by the competent supervisory authority, German VASPs’ obligation to comply with Travel Rule obligations set in Articles 3 and 4 of the Crypto Securities Transfer Regulation (KryptoTransferV) can be suspended for the time period specified in the notification up to 12 months. The VASP may request a one-time extension of up to an additional 12 months if necessary, as long as they provide a reasoned notice before the initial 12-month period expires.
“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.
1. 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.
2. 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.
3. 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.
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.
4. 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.”
German VASPS and financial institutions can utilize Notabene's software, tools, and comprehensive data to immediately signal Travel Rule compliance readiness to BaFin. Our end-to-end Travel Rule solution is tailored to the compliance needs of our clients across jurisdictions, including Germany. Notabene's wallet identification tool allows companies to perform proof of ownership verification when interacting with self-hosted/non-custodial wallets. Leverage the verified information in our Notabene Network to conduct counterparty due diligence before sending a transaction.
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