New German Government Mentions Crypto Regulation in Coalition Agreement

Germany’s new government has mentioned cryptocurrencies in its coalition agreement, arguing for an even playing field between traditional finance and “innovative business models.”

This week, Germany's three political parties reached a coalition deal, with the left-leaning Social Democrats (SDP), the Green Party and the right-leaning Free Democrats (FDP) set to govern from December.

According to the 177-page agreement, published Nov. 24, the coalition calls for a new “dynamics related to the opportunities and risks of new financial innovations,” such as cryptoassets and blockchain businesses:

"We are developing European financial market regulation laws suitable for digitization and complex group structures to ensure comprehensive and risk-appropriate regulation of new business models."

The agreement added: “We need joint regulation of the crypto space in Europe. We require crypto asset service providers to identify beneficiaries consistently.”

The document states that the EU regulator should “not only take care of the traditional financial sector, but also prevent the misuse of cryptocurrency values for money laundering and terrorist financing.”

The formation of the coalition reportedly came after two months of negotiations following Germany's federal election on Sept. 26, which would mark the end of Angela Merkel's 16-year term as chancellor, who is about to Retired and will be succeeded by Olaf Scholz of the Social Democrats.

Crypto progress in the EU

Elsewhere on the continent, the European Council, which guides the EU's political agenda, passed two proposals called the Market Regulation in Cryptoassets (MiCA) Framework and the Digital Operational Resilience Act (DORA).

In particular, the MICA, drafted by the European Commission in September 2020, aims to create a "regulatory framework for crypto-asset markets that supports innovation and exploits the potential of crypto-assets." While it still needs to be approved by the European Parliament, if passed, it would impose stricter requirements on issuers of crypto assets, with the exception of non-fungible tokens (NFTs) and utility tokens.

In a comprehensive post by user “BelgianPolitics” on Reddit’s r/CryptoCurrency subreddit on Nov. 26, the progressive regulation proposal was called “by far the most important proposal for the entire crypto industry.”

As of this writing, the Reddit user's analysis has received nearly 900 comments and provides a detailed rundown of the proposed law in MICA. The authors stress the importance of these proposals:

BelgianPolitics said: "All entities operating in the EU must abide by these rules. However, due to the 'Brussels Effect', there is a good chance that these rules will eventually become the international standard. While all eyes are on the United States and China, the EU has inadvertently gone the wrong way. ahead."

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