Germany Says Cryptocurrencies Pose No Threat to Financial Stability
On June 12, the German government responded to a parliamentary inquiry posed by right-wing political party Alternative for Germany on issues surrounding cryptocurrencies. The response states that “Bitcoins and other crypto-tokens do not pose any threat to financial stability in the Federal Governments view.”
The German government’s response goes on to explain that cryptocurrencies take up too small an amount of market cap to make any sort of special regulatory action taken against it necessary. However, there are security concerns surrounding money laundering, funding of terrorist organizations, online gambling, and other forms of illegal revenue that are being prepared to be studied in a national risk analysis assessment project expected to be completed sometime next year. The German government hopes this assessment will provide further information on the scope of illegal activity involving cryptocurrency, and will use it to determine if there is any need for further government intervention.
At present, there are already a number of regulations surrounding cryptocurrency established in German law. German cryptocurrency traders are held to the same anti-money laundering regulations as any other financial service providers, and any commercial trading of cryptocurrency requires the permission of the Federal Financial Supervisory Authority (BaFin).
Perhaps most notably, the German government states that further regulation of cryptocurrencies may most importantly require a coordinated effort at the international level. This notion echos the position of many other European nations as crypto by its very nature isn’t bound by any national borders.
“there is a need for coordinated action at European and international level. The Federal Government is therefore pressing for a harmonized handling of crypto-tokens at European and international level.”
In a report by the International Monetary Fund in April, many of the same points were made. The report states that the primary point to be made surrounding cryptocurrencies is that they make up too small a share of market capital for there to be concerns of any serious financial implications arising from it.
While federal government’s aren’t concerned with the threat of cryptocurrencies, large banking corporations certainly are. Reports of banks cracking down on cryptocurrency transactions are sprouting up almost daily, and a December report by the British Center of Macroeconomics states that 61% of mainstream economists think more regulatory action needs to be taken against cryptos to protect central banking currencies.
Its worth noting that in the first quarter of 2018 Binance, currently the largest cryptocurrency exchange site on the market, posted greater profits than Germany’s biggest bank-Deutsche Bank by over $50 million. And while cryptocurrency does indeed make up a small fraction of the global market cap, In this last year alone we have seen the total market cap for cryptocurrencies increase by more than 10x with a current $283 billion value.
Its been a noteworthy couple of weeks for discussion surrounding cryptocurrencies among international governments. As crypto continues to plod through the current bear market, governments have generally remained neutral and somewhat apathetic. However, its interesting to speculate what the future might hold for government’s relationship to cryptocurrencies might entail if predictions about Bitcoin reaching $25,000 value by the end of the year come to fruition.
Jacob Godshall is a former professional poker player turned cryptocurrency enthusiast. He is a contributing writer at Unhashed, and aims towards furthering the spread of ideas and important information surrounding all things crypto. In his spare time, Jacob enjoys reading and making electronic music