The new German government has made room for crypto in its coalition agreement, soliciting for an equal playing field between traditional finance and “innovative business models.”
A coalition was agreed upon by three German political parties this week that will see the Social Democrats (SDP), the Green Party, and the right-friendly Free Democrats (FDP) take charge from December this year.
Quoting a rough translation of the 177-page agreement published on Nov 24, the coalition is in support of a new “dynamic in relation to the opportunities and risks from new financial innovations” such as crypto assets and blockchain businesses:
We are making European financial market supervisory law fit for digitization and for complex group structures in order to ensure holistic and risk-adequate supervision of new business models […] We need joint European supervision for the crypto sector. We oblige crypto asset service providers to consistently identify the beneficial owners.
According to the document, the EU supervisory authority should “not only take care of the traditional financial sector but also prevent the misuse of crypto values for money laundering and terrorist financing.”
It took two months of negotiations before the coalition was formed after the German federal election on Sept. 26. It signals the end of Angela Merkel's 16-year reign as Chancellor and she will be replaced by the SDP’s Olaf Scholz.
Meanwhile, the European Council which oversees the EU's political agenda adopted two proposals named the ‘Regulation on Markets in Crypto Assets (MiCA) framework and the ‘Digital Operational Resilience Act' (DORA).
The purpose of MICA, which was initially drafted by the European Commission in September 2020, is to create a “regulatory framework for the crypto-assets market that supports innovation and draws on the potential of crypto-assets.”Although it still needs to be approved by the European Parliament, it will subject crypto assets issuers to more stringent requirements if enacted. Interestingly, non-fungible tokens (NFTs) and utility tokens are not inclusive in the scope of the regulation.
A Reddit user “BelgianPolitics” labeled the progressive regulatory proposal as the “most important one to date for the entire crypto industry.” in a comprehensive post on the r/Cryptocurrency subReddit on Nov. 26.
His analysis provided a detailed rundown of the proposed laws in MICA and it attracted about 900 comments at the time of writing. The author highlighted the significance of the proposals stating that:
These rules will have to be followed by every entity operating in the European Union. However, because of the 'Brussels Effect,' there is a very good chance these rules will become international standards in the end. While everyone is focused on the US and China, the EU is casually leading the way.